Due to the Corona epidemic, most people are not able to travel with their family and because of this they are not able to avail the facility of Leave Travel Allowance (LTA). The central government announced a new scheme on 12 October last month with an aim to provide LTA tax exemption facility to such people and to increase the GST (Goods and Services Tax) collection. Earlier it was only for central employees but after that on 29 October it was made available to all other personnel. Under this scheme, LTA can be claimed without traveling.
LTA Tax Exception Claim Provision
According to the tax rules, if the employer pays money to travel to any place within the country, either on his own or with his family, then it gets the facility of exemption. An employee can avail tax exemption on twice the journey done in block of 4 calendar years already prescribed under LTA. The current block is 2018-2021. This means that LTA facility can be availed on travel up to two times during this period. If you are not able to claim LTA in this block, then you can claim it in the next block by forwarding it. Apart from this, it is not necessary to travel twice for LTA benefits, it can be cashed in a single trip.
LTA Claim Without Travel
- Under certain circumstances, now, according to the new announcement of the Central Government, central employees can get cash in lieu of grant of leave and LTA and other employees can claim under LTA.
- For cash in lieu of Entitlement, you have to purchase goods or services equal to the amount of grant.
- All employees will have to spend at least three times the LTA amount for the LTA claim claim.
- This purchase will have to be made from such vendors who will be GST registered and at least 12 percent GST on those goods or services.
- Payment must be made in digital mode. There will be no benefit on payment in cash or checkbook.
- Employer will have to give original copy of tax paid invoice.
- If the entire amount is not spent, then benefit will also be available in the same proportion.
- If LTA is a part of your salary, then the employer means that the company will pay it as taxable income in case of non-payment of claim. The company will pay LTA after deducting tax according to the tax slab of the employee.
These people will get benefit
Only those personnel who are entitled to LTA can get this benefit. Whether you choose ITR filing for taxation according to the old rules or according to the new rules, it will also depend on whether you will get LTA benefit or not. If you have opted for a new taxation scheme, then you cannot claim this amount unless the company consents to it.
These people should take this advantage
For goods or services that have a minimum GST rate of 12 per cent, spending equal to three times the LTA amount will be equal to 36 per cent of the LTA Exemption value. Your tax rate can range from 5.20 per cent to 42.70 per cent, so it is better to consider before spending 36 per cent to take advantage of LTA exemptions. The fare limit for both types of personnel (central and other) is 36 thousand for one person.
You can understand this with an example. Suppose there are four members in your family, then you will get a maximum LTA exemption of 1,44,000. To claim this, you have to spend at least 4.32 lakh rupees on goods or services that attract at least 12 percent GST. Thus, on this purchase you will have to pay a GST of Rs 51,840. Therefore, to take advantage of LTA exemption, decide only by comparing GST amount and income tax according to your slab.
The current block of four years will remain till 31 December next year, but if you are not able to claim this block then you can carry it forward in the next block and claim LTA in the next block.
This scheme is beneficial for those workers who are planning to purchase goods or services with a GST slab of more than 12 per cent as the savings on income tax will be a discount for such people. So if shopping is not necessary then there is no need to hurry for LTA claim.