Your LTA can help you save on tax

Under Section 10 (5) of the Income- tax Act, if an employee whose remuneration includes LTA undertakes a trip within the country (and is on leave during the period), s/he can claim an exemption for the amount. Apart from the employee, it covers such expenses of spouse, children as well as dependent parents and siblings. However, this exemption is limited to two children born on or after October 1, 1998. The restriction is not applicable to children born before this date.

Do note that this tax benefit cannot be claimed every year, but only twice in a pre-defined block of four calendar years. The present block started from January 1, 2010, and will last until December 31, 2013. The previous one ended on December 31, 2009. If you do not avail of the concession in any particular block or undertake just one journey, you can carry forward one journey to the next block. However, this has to be utilised in the first year of the new block.

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During the New Year, especially the January is the indication of the tax-saving season.

During the first three months of a calendar year, tax-payers typically have to deal with never-ending calls various insurance agents.

However, making tax-related investments is not the only way of saving on taxes. There are several other options at your disposal.

Take for instance , Leave Travel Allowance (LTA) which is the part of the salary given to employees to help them cover their personal travel expenses incurred during the year.

Also, you cannot necessarily claim the entire LTA amount as deduction. It will always be the lower of the actual amount spent and the allowance granted by your employer. In addition, there are a host of other fundamentals that need to be taken into account. For example, if you have opted to fly to the destination, only the amount equal to the economy class airfare of the national carrier by the shortest route to that city would be allowed as deduction.

This apart, if you are travelling by road or rail, the cost of first class air conditioned ticket to the destination by the shortest route would be considered for exemption. In case you are travelling to several places, the destination farthest from your residence will be taken into account for calculating the exemption amount.

To claim the exemption, you need to submit the relevant bill and tickets within the deadline prescribed by your employer. A failure to do so will result in the LTA paid being considered taxable and income tax will be deducted according to the rate slab you fall under.

However, you can make a claim for this exemption at the time of filing your income tax return and avail of a tax refund later.