The MJA is given by employers to their employees for travel during leave, and is claimed as an exemption subject to meeting the conditions of the Income Tax Act.

Are you planning to go on vacation? It’s time to think about how you can save on taxes while enjoying your vacation in some scenic locations in India. Salary taxpayers cannot afford to miss out on tax deduction benefits as this can significantly increase their tax revenue under the Income Tax Act. Depending on the salary structure offered by the employer, the employee can use the tools available in the law to reduce his tax liability. In addition to deductions, the Income Tax Act also provides exemptions that help reduce their tax liability. The Leave Travel Allowance (MJA) is such an exemption.

The MJA is given by employers to their employees for travel during leave, and is claimed as an exemption subject to meeting the conditions of the Income Tax Act.

LTA Claim Terms & Conditions

LTA can only be claimed against travel within India but not allowed for travel abroad. Travel by employee or their family members, including spouse, children, dependent parents and siblings may be eligible for the LTA benefit.

For employees born after October 1, 1998, the MJA is available for a maximum of 2 children. LTA benefits are available for travel expenses and excluding payment for food and lodging.

You can only claim the MJA twice in a block of four years. A block year is not like a financial year, and the government of India determines it. We are currently in the block year 2018-2021, but people were unable to travel due to the Covid-19 pandemic.

That is why, in October 2020, the government announced the LTC cash receipt scheme, which is only valid until March 31, 2021. If you have purchased goods under this scheme or used services that have a GST rate of not Less than 12 percent through digital means, you can avail the exemption from the supposed LTC rate – up to Rs 36,000 per person for up to four family members or a third of travel expenses, whichever is the lower. Cash payments are not considered benefits in this scheme.

It is essential to have leave during the period that you are entitled to the MJA. Travel expenses allowed under the MJA are subject to terms and conditions. For example, in the case of air travel, the rate for travel by national airline using the shortest route or the actual costs incurred, whichever is the lower, are allowed as an exemption. Likewise, if the journey is by a means of transport other than airways and the destination is connected by rail, the cost of a first class train fare by the shortest route or the actual cost incurred, whichever is less, may be allowed if exemption .

The Right Time to Claim an LTA

The right time to claim the LTA is when you can maximize your tax savings by using the LTA option. LTA can be claimed for up to two trips in a four-year block, and if you can’t claim during that block, you’ll have the chance to carry it over to the first year of the next block year.

If you qualify for the LTA and have incurred actual travel expenses that can be claimed as an exemption, don’t miss it as it can help you reduce your tax liability.

Prefer LTA for a journey where you have incurred higher actual costs and match the MJA allowed in your salary structure. Suppose you are claiming MJA for a trip for which you incurred much lower actual costs compared to the travel costs allowed under the ICT Act and the MJA threshold stated in your CTC. In that case, you’re exhausting your LTA option for a paltry tax savings. For example, if you have traveled during your two different periods of leave namely ‘A’ with Rs 10,000 Eligible LTA Expenses and ‘B’ with Rs 50,000 Eligible LTA Expenses during the block year. If your salary structure allows you a higher LTA, you should claim LTA for a trip ‘B’ because you will then get a larger tax exemption.

Important to mention here is that MJA is dependent on the salary structure the employer offers and may not be available to you if your employer has not granted you this benefit. If you intend to claim the MJA benefit, always keep the original travel documents, the invoice from the travel agency and other travel documents; you may need them if requested by your employer.

(The author is CEO, BankBazaar.com)


This post Canceling travel reimbursement: when is the right time to claim your LTA? was original published at “https://www.financialexpress.com/money/leave-travel-allowance-when-is-the-right-time-to-claim-your-lta/2462581/”

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