by Mr.T E Gautham, CEO, Hinote Systems, Chennai
The calculation of the income tax exemption on Leave Travel Allowance
(LTA) amount. The exemption is
available only on travel expenses (ticket fare etc.) incurred by the employee on leave
travel. Expenses on local conveyance,
boarding, lodging, sightseeing etc. can not be considered.
Several people mistakenly believe that whatever is spent on leave travel
towards ticket fare, taxi fare etc. can be considered in full for tax
exemption.
There are many as laid down by Section 10(5) of the Income Tax Act and
Rule 2B of the Income Tax Rules - which govern calculation of the actual tax
exemption. Let us see how one can calculate the income tax exemption if an employee submits details
of the travel expenses to the employer.
 |
| Mr. T.E. Gautham, CEO, Hinote Systems Chennai |
The 2 critical determinants of tax exemption on LTA are the mode of
travel & the places visited by the employee.
Mode of travel determines extent of tax exemption Whatever be the mode of transport (train,
air, ship etc.) used by the employee, the extent of tax exemption is determined
as per the following rules.
|
Serial Number
|
Journey performed by
|
Exemption
Limit
|
|
1
|
Air
|
Economy
Air fare of the national carrier (Air India) by the shortest route to the
place of destination.
|
|
2
|
Any
mode (bus, train, ship, taxi etc.) other than air to places which are
connected by rail.
|
First
Class Air conditioned rail fare by the shortest route to the place of
destination.
|
|
3
|
Any
mode (bus, train, ship, taxi etc.) other than air to places which are not
connected by rail.
|
(a) Where public transport system exists,
first class or deluxe class fare on such transport by the shortest route to
the place of destination.
(b)
Where no public transport system exists, first class A/C rail fare, for the
distance of the journey by the shortest route, as if the journey has been
performed by rail.
|
The Income Tax Act & Rules refer to travel from one
place (origin) to another (destination). While there is no explicit reference
to the return journey in tax law, it may be assumed that the term “journey” for
the purpose of determining tax exemption on LTA includes both “To” and “Fro”
journeys.
In case an employee travels to many places, calculation of income tax
exemption gets somewhat complex. We will see how to calculate tax exemption
when an employee visits more than one place later.
Let us first look at some illustrations when an employee travels from one
place to another and gets back.
About Hinote Systems..
Hinote offers payroll services and software to organizations in India. We
currently manage payroll for thousands of employees across customer
organizations all over India.
Our customer organizations are from sectors such as manufacturing and
services including Information Technology (IT), Business Process Outsourcing
and the social sector. We have significant expertise in payroll and information
technology.
Hinote Systems provides services,
Software Related to Payroll / HR
Email: info@hinote.in, gautham@hinote.in
Web Site: www.hinote.in
Hinote Systems
1, Venkatarathinam Nagar Extn,
Second Street, Adyar, Chennai- 600 020
phone: +9144 4330 7244
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