Leave Travel Allowance

Purpose To provide an opportunity to the employees and their families to visit a place of their choice for vacation within India and compensate expenses incurred towards cost of travel, up to a maximum Leave Travel Allowance (LTA), which forms a part of their salary Scope Applicable to all permanent employees in the organization Guidelines

The allowance varies between INR 5000 to INR 15000 per annum based on your band/level. Band Eligibility Per Annum (INR) Band 4 5000 to 10000 Band 3 15000 Band 2 24000 Band 1 & below 45000 You must avail a minimum of 3 days leave to claim reimbursement. Your Leave Travel Allowance will be reimbursed as per the current entitlements on this benefit. These entitlements will be credited to the employee’s Leave Travel reimbursement account at the year end. The Leave travel reimbursement is subject to prior sanction of leave from your leader. Your leave should be well-planned. The employee can claim LTA only once in last quarter of the financial year, i.e. from 1st Jan 2009 to 15th March 2009.

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The Income Tax Rules entitles an employee to claim this allowance as non-taxable benefit only 2 times in a block of 4 years subject to actual expenses supported by evidence of travel such as air tickets, rail tickets, bus tickets, etc. However, these are restricted to travel by Economy class Air Fare / Second AC sleeper or First class in Train/Bus.

LTA PROCESS FORM As per the Income Tax rule an employee can claim Leave Travel Allowance as non-taxable benefit only 2 times in a block of 4 years. All permanent employees are eligible for Leave Travel Allowance as per the policy. The claim varies for all the employees as per band / level. To avail this benefit, employees will need to follow the process given below: • • • • • Employee should avail a minimum of 3 days leave to claim LTA. Leave should be planned and have approval from the Manager 15 days to 1 months from the date of actual vacation. Employee needs to fill in the LTA Claim Form. Employee should take a print out of the leave approval from Manager & attach the original bills along with the LTA Claim Form. Arrange it in order - (a) Claim Form (b) Leave Approval print out (c) Original Bills), put in a sealed cover and write the following information on the cover: o Employee ID Number o Employee Name o Leave Travel Reimbursement Drop the cover in the Drop box provided at your work location. LTA claims are collected only at the end of the year. Finance will send a corporate communication to all employees announcing the claim submission schedule. Finance will collect the bills, verify and process payment. For any further clarification employee can write to xyz@abc.com

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Note: Employee can claim LTA only in the last quarter of the financial year, i.e. from 1st Jan 2009 to 15th March 2009.

10 MUST knows about Leave Travel Allowance 1. You can get LTA only if you have applied for leave from your company and have actually traveled. However, international travel is not valid. You must have traveled within the country. 2. The entire cost of the holiday is not covered. Only the travel costs are covered. So, whether you fly, hop on to a train or take public transport, you will have to show the ticket to claim your LTA. This means you will need to keep your air, rail or public transport ticket. 3. If you travel by car and it is owned by a central government organization like ITDC, the state government or the local body, then LTA is permitted. If you could not get public transport and resorted to private transport like renting a car, get a bill issued by the rental company. If your employer does not accept the bill, you can always file an income tax return, claim an exemption and get a refund. 4. 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. For children born after October 1, 1998, the exemption is restricted to only two surviving children (unless, of course, one birth has resulted in multiple children like twins and triplets). If your family travels without you, no LTA can be claimed. You have to make the trip, either by yourself or, if claiming for your family, you should travel with them. 5. LTA is not related to when you started your employment. The government fixes blocks of years. These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31). The current block is 2006-09 -- January 2006 to December 2009. The earlier one was from 2002-05 -January 2002 to December 2005. During this time period, a person is entitled to two LTA claims. 6. Though you can claim two journeys in a block of four years, you can claim the LTA benefit just once in a year. You cannot claim both the journeys in one year. So, while a person can get an income tax exemption for two journeys in a block of four calendar years, he can make a trip only once a year. If you make two trips in a year, you lose one. One-way out is to claim one and make your spouse claim the other.

7. You can carry forward your LTA. One LTA can be brought forward and claimed in the first year of the next block. Let's say you do not take your LTA in 2002-05. Or that you use only one LTA. Don't worry, you will be able to take the pending LTA in 2006. This means that, in the 2006-09 block, you will be totally entitled to the three journeys. 8. 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 unutilized. Let's say that, in the 2002-05 block, you claimed LTA in 2003. In 2004, you switched jobs. You can still claim your second journey with your new employer. Of course, your new employer will ask to look at your earlier tax returns to see whether it has been claimed or not. 9. You must take the shortest route to your destination to be eligible for LTA. Let's say you are going from Delhi to Mumbai on a holiday. So the cost of your travel from Delhi to Mumbai and Mumbai to Delhi will be eligible for LTA. 10. If your LTA is not utilised, it gets added to your salary and you will be taxed on it. Let's say you and your spouse are both employed and both have LTA as part of the salary package. Your LTA is Rs. 20,000 and hers is Rs. 20,000 too.

Both of you and your child go for a holiday. The tickets for the three of you amount to Rs. 15,000. You supply the tickets to your office and this amount will be eligible for a tax deduction; the balance Rs. 5,000 will be taxed. You can claim exemption only to the tune of your expenditure. If you claim this, your spouse will not be able to claim this same holiday from her employer. His/ Her Rs. 20,000 will be taxed. Unless, of course, you go for another holiday and he/ she claims it. Or, let's say, you spend Rs. 30,000 on tickets but your LTA is just Rs. 20,000. You can claim up to Rs. 20,000 and tell your spouse to claim his/ her ticket from his/ her employer.

Supreme court of India gave ruling that employers, while reimbursing LTA claims of their employees, are under no statutory obligation to collect evidence and provide them to tax authorities. As per Income tax rules of India, if transport bills for LTA are not provided, the amount will be taxed. E.g. If an employee has LTA allowance as Rs 50,000 in his CTC(cost to company), and he provides proofs of Rs 40,000 (boarding pass, air tickets, taxi vouchers) then income tax will be deducted for rest of the Rs 10,000. Does not matter whats the amount of LTA in an employee’s package, income tax laws only permits domestic air tickets only for LTA claim. This court order came after a hearing of case between Larsen & Toubro and income tax department of India. Income tax department had argued that employer has to collect proofs from employee for LTA. Rejecting this, the supreme court in its order said: “The beneficiary of exemption under Section 10(5) (of the Income Tax Act) is an individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee(s).”

LTA is leave travel allowance, which is given to the employee by the employer for travelling purpose. Generally, it is given once in four years. LTC is leave on credit.Under this E.g You can take 10 leaves in a year. now , every company has its own rule. Let say you took 4 leaves inthe year. You are still left with 6. Now, if the financial year for which they are assigned gets over, there are different options1.The remaining 6 Leaves stands cancelled 2.They are credited to your next year account i.e. in next year you can have 6+10 leaves 3.You can be reimbursed for the remaining 6 days. FAQs about LTA Basically, it is a monetary benefit that you get on the expenses you incur when you travel. Here's to clearing your doubts. 1. On what basis can I claim LTA?

If you fulfill two criteria, you can do so: i. You should have taken leave from your company ii. You should actually travel You can either travel alone or with your family. However, if your family travels without you, no LTA can be claimed. 2. How often can I claim LTA? Twice in the block of four calendar years. This block is not calculated with the start of your employment. The government defines these blocks. Presently the block is 2002-2005. Since it is the calendar year and not the financial year, it will be from January 1, 2002 to December 31, 2005. 3. What if I fail to avail of it? In case you fail to do so, there is a carry over option. Let's say that in the block of four years, you never did claim any LTA. You can do so in the first year of the next block of four years. 4. What is the proof of travel to avail of LTA?

According to rule 2B, you can produce an air, rail or any public transport ticket. You can even submit the bills issued by the car rental company if you rent a vehicle. However, the travel is applicable anywhere in India and not abroad. So an international air ticket will not hold. 5. Is LTA taxed? You can receive LTA as either reimbursement or allowance. Reimbursement In case of LTA as reimbursement, it is not taxable. Let's say your company offers an LTA of Rs 50,000. For proof of travel, you produce an air ticket of Rs 10,000. In such a case, you can claim only Rs 10,000 as LTA and it will be exempt from tax. Allowance If you do not submit any proof of travel, you will get your LTA but will have to pay tax on it. If you produce proof of travel, it will not be taxable to the extent your proof of travel is covered. Let's say you are entitled to Rs 50,000 as LTA as part of your salary. Since you produced proof of travel as Rs 10,000, you will not be taxed on this amount. However you will be taxed on the net Rs 40,000 as per your

income tax slab rate. LTA is not a fringe benefit as the latter are benefits that are usually enjoyed collectively by the employees and cannot be attributed to individual employees. 6. Can both spouses claim LTA? If both spouses are getting the LTA benefit in their places of work, they can both claim exemption on LTA from their employers and the benefit for four journeys in one block. They do not have to take the precaution of not travelling twice during the same year. Moreover, they can take the same family members or different ones as long as they stick to the definition of the members for this purpose. Family includes spouse, children as well as dependent parents, brothers and sisters. In respect of children born on or after October 1, 1998, the exemption will be restricted only to two surviving children unless the birth after one child has resulted in multiple births (twins or triplets). 7. If I and my wife travel this year, can we both claim LTA simultaneously? No. You cannot claim LTA twice for the same journey. If both of you take a holiday together and you claim LTA, she cannot. 8. If I am entitled to a particular amount as LTA, but my

expenses are higher, can I claim more? Say in the year 2005-06, you receive on Rs 8,000 as LTA, but spend Rs 50,000 on travel. You can claim exemption only to the tune of Rs 8,000.

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