A vacation with family can be exciting and super fun. But did you know that you could get some tax incentives too? The magic word is Leave Travel Allowance. Not many of us make best use of the Leave Travel Allowance (LTA). LTA helps financially when planning a travel, and is also a great tax deduction tool. Here is everything you need to know about LTA.
Understanding Leave Travel Allowance LTA is an allowance paid as part of salary, which employers grant to each of their employees. The total Leave Travel Allowance for each employee is calculated on an annual basis. This allowance offers tax deduction benefits and helps employees cover any of their domestic travel expenses. Companies usually offer LTA to employees who have worked with the enterprise for a minimum period of 1 year. Note that if you are receiving LTA as part of your CTC but are not utilizing it towards any travel expense, the entire amount offers no tax benefits and is taxable as per your tax bracket.
What is Included and Excluded in LTA
LTA Tax Savings and the 4-Year LTA Blocks
Leave Travel Allowance offers tax benefits under Section 10(5) of the Income Tax Act. But LTA is permitted only for two travels within a block of 4 years as stipulated by the IT department. The block applicable currently is for travel undertaken from 2018 to 2021. The good news is that if you fail to claim against LTA in any of the 4-year blocks, you can carry over the LTA to the next block. For example, if you claimed against LTA only once for the block ranging from 2014-17, you can carry over your LTA to the existing block of 2018-2021 and claim a total of 3 LTA exemptions for the block.
Important Points to be Aware of Before Filing LTA Claims
So, the next time you set off on that exotic beach or backwaters sojourn, know your exemption limits under LTA and remember to claim once you're back!
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