Hi, I have joined a company and my boss is asking me to make a policy so that seniors of our company gets proper benefit from the exemption of tax which is for leave travel allowance I would request you to please provide me a solution of it.
From India, New Delhi
7From India, New Delhi
Dear Ankita,
A policy provides a common ground of understanding and clarifiaction to all employees.
Please find below information which will help you to draft and implement policy.
Leave Travel Allowance is one of the best tax saving tools that an employee can avail. It is a tax exemption offered by employers to their employees. Leave Travel Allowance as the name suggests is an allowance paid to the employee by the employer when the former is travelling with their family or alone. The amount paid as Leave Travel Allowance is tax free.. The exemption is restricted only to the travel cost incurred by the employee. The tax exemption is not valid for the costs incurred during the entire trip which might include expenses such as food expenses, shopping expense and other expense.The exemption is not available for more than two children of the individual born after October 01, 1998. Exemption is allowed for only two travels within a block of four years. The current block is between 2014-2017. If the individual doesn’t take advantage of the exemption within this block, they can carry it over to the next block.Employers usually don’t have to submit proof of travel to tax authorities while assessing travel allowance claims. Even though it is not considered mandatory for employers to collect proof of travel from the employees, they still have the right to demand documentary proof if needed. The employee is advised to keep proof of their travel such as boarding passes, flight tickets, invoice of travel agent, duty pass and other documentary proof in case the assessing officer or the employer demands for it.Given below are the travel limitations applicable under Leave Travel Allowance.
Leave Travel Allowance covers only domestic travel and does not cover international travel
The mode of travel should be either air travel, railway or public mode of transportBefore you consider claiming for LTA, you are advised to check your pay structure. The LTA amount can vary from one employee to the other, however, if you are eligible for LTA, you will need to produce tickets/bills as per the criteria and submit the same to your employer. Every company will formally announce the dates for LTA claims, you will then need to fill in the applicable forms, attach the documents such as travel tickets, boarding pass etc., and send it out to your HR or accounts team. An employee will need to make the LTA claim before the employer makes the final calculation for tax liability.Applicable LTA Deductions
Based on the salary structure, you can claim for LTA exemption only to a certain extent. The LTA can be claimed under the following circumstances:
Travel by air - When the destination is connected by air, the exemption is allowed for ticket fares of a national airline's economy class.
Travel by train - When the destination is also connected by train, the exemption is allowed for AC first-class tickets
Travel by other modes of transport - If the destination is not connected by air or rail, an amount equivalent to first-class, deluxe, or AC first-class fare, whichever is lower, can be claimed for exemption under LTA.
The LTA deductions will be considered only for the shortest route to the destination and back. If an employee is entitled to an LTA amount of Rs.30,000 but he/she has claimed only for Rs.20,000, the applicable LTA deduction will be for Rs.20,000 and the remaining Rs.10,000 will be added to your income which will be accountable for tax liability.
Hope this information is enough to draft a policy.
Regard,
Sapana
From India, Pune
A policy provides a common ground of understanding and clarifiaction to all employees.
Please find below information which will help you to draft and implement policy.
Leave Travel Allowance is one of the best tax saving tools that an employee can avail. It is a tax exemption offered by employers to their employees. Leave Travel Allowance as the name suggests is an allowance paid to the employee by the employer when the former is travelling with their family or alone. The amount paid as Leave Travel Allowance is tax free.. The exemption is restricted only to the travel cost incurred by the employee. The tax exemption is not valid for the costs incurred during the entire trip which might include expenses such as food expenses, shopping expense and other expense.The exemption is not available for more than two children of the individual born after October 01, 1998. Exemption is allowed for only two travels within a block of four years. The current block is between 2014-2017. If the individual doesn’t take advantage of the exemption within this block, they can carry it over to the next block.Employers usually don’t have to submit proof of travel to tax authorities while assessing travel allowance claims. Even though it is not considered mandatory for employers to collect proof of travel from the employees, they still have the right to demand documentary proof if needed. The employee is advised to keep proof of their travel such as boarding passes, flight tickets, invoice of travel agent, duty pass and other documentary proof in case the assessing officer or the employer demands for it.Given below are the travel limitations applicable under Leave Travel Allowance.
Leave Travel Allowance covers only domestic travel and does not cover international travel
The mode of travel should be either air travel, railway or public mode of transportBefore you consider claiming for LTA, you are advised to check your pay structure. The LTA amount can vary from one employee to the other, however, if you are eligible for LTA, you will need to produce tickets/bills as per the criteria and submit the same to your employer. Every company will formally announce the dates for LTA claims, you will then need to fill in the applicable forms, attach the documents such as travel tickets, boarding pass etc., and send it out to your HR or accounts team. An employee will need to make the LTA claim before the employer makes the final calculation for tax liability.Applicable LTA Deductions
Based on the salary structure, you can claim for LTA exemption only to a certain extent. The LTA can be claimed under the following circumstances:
Travel by air - When the destination is connected by air, the exemption is allowed for ticket fares of a national airline's economy class.
Travel by train - When the destination is also connected by train, the exemption is allowed for AC first-class tickets
Travel by other modes of transport - If the destination is not connected by air or rail, an amount equivalent to first-class, deluxe, or AC first-class fare, whichever is lower, can be claimed for exemption under LTA.
The LTA deductions will be considered only for the shortest route to the destination and back. If an employee is entitled to an LTA amount of Rs.30,000 but he/she has claimed only for Rs.20,000, the applicable LTA deduction will be for Rs.20,000 and the remaining Rs.10,000 will be added to your income which will be accountable for tax liability.
Hope this information is enough to draft a policy.
Regard,
Sapana
From India, Pune
Dear Ankita,
The fellow member (Ms Sapana) has clrearly explained you the LTA points (process, criteria, limitation etc.). I would like to add why your senior are looking tax exemption only on LTA? Though LTA is very good and acceptable mode of Tax Exemption, still there could be more options. Have you considered those points as well?
Now coming to some addition to LTA clarification, I would like to add (which I think missing above):-
The exemption is restricted to only two surviving children (unless, of course, the second birth has resulted in multiple children like twins and triplets).
LTA covers travel for yourself and your family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working) and children.
If your family travels without you, no LTA can be claimed. You have to make the trip.
LTA is not related to when you started your employment. The government fixes blocks of years. These blocks are as per calendar years (January 1 to December 31). The current block period is between 2014-2017 (as stated by Ms Sapna as well).
Generally, in a block period, for tax exemption an employee is entitled to two LTA claims. In most cases the tax exemption is allowed only agst submission of proofs, which seems to be justified. Otherwise how you will calculate the travelling amount only. (In our company the travel proof is must for tax exemption). Though the employee can claim the LTA as per his/her requirement, but the tax exemption will be allowed only for two claims in a block period. The amount of the excess journey (beyond two) will be countable for Income Tax in the F.Y.
The employee can claim two year’s LTA in a year and can submit adequate proofs to get Tax Exemption. If the proofs are lower than the LTA amount than the balance will be countable for taxable income in the F.Y.
But you cannot claim two year’s separate journeys in one year. Means the proofs must be related to one journey to get tax exemption in a single claim.
One LTA can be carry forwarded into next block period (for tax exemption), but same need to be claimed in the first year of next block period. For Example, if you do not take your LTA in 2014-17. Or you avail only one LTA. Than, you will be able to take the pending LTA in 2018. This means, in the 2018-2021 block, you will be totally entitled to the three journeys.
Even if you switch jobs, you can get the LTA not only from your present organization but also from your former employer, if the concession is lying unutilised for the block period.
The LTA can be claimed only if you applied for leave and have actually traveled. There is two separate processes for taking LTA and availing the Tax Benefits. In order to taking the amount is advance, the employee need to apply in the LTA Advance Form. In order to avail the tax exemption, the employee need to submit LTA declaration. The declaration should be comprises of family detail (as per eligibility, who took the journey), Traveling Cost and related travelling bills.
In case both (you and your spouse) are working, if you claim any LTA journey, than your spouse will not be able to claim the same holiday travelling cost from his/her employer. Unless, of course, you go for another holiday and he/ she claims it.
Last but not the least, I would like to suggest you to do home work to precise the points (my points and Ms Sapna points). May be some points have been repeated, or there may be some contradiction. The material is too long, you need to re-draft the same to frame a proper policy.
I have also taken the points from the site itself. But tried my best to narrate it properly and not to repeat the points as suggest by Ms Sapna.
I think it is more than enough to cover the topic.
From India, Delhi
The fellow member (Ms Sapana) has clrearly explained you the LTA points (process, criteria, limitation etc.). I would like to add why your senior are looking tax exemption only on LTA? Though LTA is very good and acceptable mode of Tax Exemption, still there could be more options. Have you considered those points as well?
Now coming to some addition to LTA clarification, I would like to add (which I think missing above):-
The exemption is restricted to only two surviving children (unless, of course, the second birth has resulted in multiple children like twins and triplets).
LTA covers travel for yourself and your family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working) and children.
If your family travels without you, no LTA can be claimed. You have to make the trip.
LTA is not related to when you started your employment. The government fixes blocks of years. These blocks are as per calendar years (January 1 to December 31). The current block period is between 2014-2017 (as stated by Ms Sapna as well).
Generally, in a block period, for tax exemption an employee is entitled to two LTA claims. In most cases the tax exemption is allowed only agst submission of proofs, which seems to be justified. Otherwise how you will calculate the travelling amount only. (In our company the travel proof is must for tax exemption). Though the employee can claim the LTA as per his/her requirement, but the tax exemption will be allowed only for two claims in a block period. The amount of the excess journey (beyond two) will be countable for Income Tax in the F.Y.
The employee can claim two year’s LTA in a year and can submit adequate proofs to get Tax Exemption. If the proofs are lower than the LTA amount than the balance will be countable for taxable income in the F.Y.
But you cannot claim two year’s separate journeys in one year. Means the proofs must be related to one journey to get tax exemption in a single claim.
One LTA can be carry forwarded into next block period (for tax exemption), but same need to be claimed in the first year of next block period. For Example, if you do not take your LTA in 2014-17. Or you avail only one LTA. Than, you will be able to take the pending LTA in 2018. This means, in the 2018-2021 block, you will be totally entitled to the three journeys.
Even if you switch jobs, you can get the LTA not only from your present organization but also from your former employer, if the concession is lying unutilised for the block period.
The LTA can be claimed only if you applied for leave and have actually traveled. There is two separate processes for taking LTA and availing the Tax Benefits. In order to taking the amount is advance, the employee need to apply in the LTA Advance Form. In order to avail the tax exemption, the employee need to submit LTA declaration. The declaration should be comprises of family detail (as per eligibility, who took the journey), Traveling Cost and related travelling bills.
In case both (you and your spouse) are working, if you claim any LTA journey, than your spouse will not be able to claim the same holiday travelling cost from his/her employer. Unless, of course, you go for another holiday and he/ she claims it.
Last but not the least, I would like to suggest you to do home work to precise the points (my points and Ms Sapna points). May be some points have been repeated, or there may be some contradiction. The material is too long, you need to re-draft the same to frame a proper policy.
I have also taken the points from the site itself. But tried my best to narrate it properly and not to repeat the points as suggest by Ms Sapna.
I think it is more than enough to cover the topic.
From India, Delhi
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Leave Travel Allowance.doc
The Ins & Outs of Leave Travel Allowance.pdf