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LTA eligibility checklist for tax-free travel

It's time for annual school-break for the kids.

It's time for annual vacation-trip for the family.

Interestingly, the Income Tax Department encourages people to travel... by granting tax-break on the Leave Travel Allowance or the LTA received by a salaried person.

If you too receive LTA from your employer, you need to be fully aware of the eligibility criteria, to enjoy a hassle-free tax exemption.

1. Eligible destination
LTA tax benefit is available for journeys within India ONLY. Foreign trips will NOT get any tax breaks.

2. Eligible number of journeys
As per IT rules, blocks of 4 years have been created. The current block spans from Jan 2014 to Dec 2017. You are entitled to claim tax benefit with respect to TWO journeys during this period. However, you cannot claim tax benefit for both the journeys in one year itself.

If you are unable to complete your quota of two tax-free trips, IT rules provide you with some relief. You can carry-forward ONE journey to the FIRST year of the next block. In other words, you get a chance to undertake one journey in 2018, in case you haven't travelled twice between 2014-2017.

3. Eligible expenses
Tax deduction is available for the expenses incurred on TRAVEL ONLY. Amount spent on boarding, lodging, local conveyance, sight-seeing etc. DOES NOT qualify for any tax breaks.

4. Eligible persons
Travel expenses of only the following people would be eligible for tax exemption:
- Self
- Spouse
- Two Children (except in case of multiple births such as twins or triplets and those born prior to Oct 1, 1998)
- Parents and siblings who are dependent on you

5. Eligible amount
Income Tax rules do not specify any particular LTA amount as the limit for tax benefit. But of course, your deduction would be restricted to lower of the following amounts:
- amount spent on travelling from the place of origin to the farthest point by the shortest route
- actual amount received as leave travel allowance.

You can undertake the journey by Air, Rail or Road and the quantum of deduction would be determined as under:
a) Journey by Air: Economy fare by the shortest route to the destination

b) Origin and destination connected by rail and the journey made by any mode other than Air
AC First Class rail fare by the shortest route to the destination

c) Origin and destination (or part distance) not connected by rail:
(i) If recognized public transport system exists: First class or deluxe class fare on such transport by the shortest route
(ii) If no recognized public transport system exists: AC first class rail fare, for the distance of the journey by the shortest route, as if the journey has been performed by rail.

6. Eligible conditions
Entire amount received as LTA would be taxable if no journeys are performed during the year. Moreover, even if your family travels and you don't, there is NO tax exemption.

In fact, not only it is necessary for you to travel, but you must also be officially on leave during this period.

7. Eligible proof
You are required to submit all the tickets, in original, and other relevant travel documents to your employer to claim LTA tax deduction.

So don't restrict your planning to travel itinerary; but also include tax planning so as to avail the maximum possible deduction on your Leave Travel Allowance.

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