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5 Suggestions To Update LTA In Budget

Leave Travel Allowance (LTA) is available as an exemption for employees to meet the cost of travel on leave to any place in India. However, some of the rules are not that employee friendly. Here we suggest changes that can help employees.

To start with lets go over the current LTA rule. LTA can be claimed twice in a period of four years, only if you have taken leave from the office and if the travel is within India. The exemption is allowed only respect of the travel fare, and not for boarding and lodging.

The amount of exemption depends upon the mode of travel. If you are traveling by air, then the economy fare on the national carrier on the shortest route is the amount exempt. If you are traveling by any other mode, then if the destination is connected by rail, the first class AC fare by train on the shortest route is exempt. For destinations not connected by rail, where recognized public transport exists the first class or deluxe class fare is exempt or where no recognized public transport exists AC first class rail fare is exempt for equivalent distance.

Given the current state of the law, we offer the following 5 suggestions that better reflect reality and holiday habits of most Indians:

1. Frequency of the exemption: Why is the exemption only available twice in a block of 4 years? It would make more sense to offer such an exemption annually.


2. Allow foreign travel: Some domestic fares in India, e.g., Chennai to Delhi, can be more expensive than international holiday routes, e.g., Delhi to Bangkok. Why limit the travel solely to domestic destinations, why not expand it to international destinations as well?


3. Mode of transport at employee's discretion: Today many different modes of transport are available that offer different levels of comfort and flexibility. Consumers have a choice, but the tax law still uses a benchmark such as equivalent AC rail fare . What if I wanted to drive from Bangalore to Ooty, or Delhi to Jaipur with my family in the comfort of my own car or a luxury car rental, why not allow me the full exemption of my car rental or petrol costs rather than limit my exemption to the AC first class fare?


4. Don't force the employee to travel with family: Currently, the employee is required to travel to claim the exemption. Today's life is such that last minute emergencies at work might arise that make it impossible for the employee to travel with his/her family. Why shouldn't the employee be allowed to claim the exemption if just his family is traveling, after all isn't the employee's effort and salary also meant for the benefit of his/her family?


5. Bills: Under a January 2009 judgment of the Supreme Court, employees are no longer required to submit proof of travel to their employers to claim the LTA exemption. However, some employers continue to demand these proofs from employees. Why not make it unambiguously clear that these bills and proofs are not required to be filed?

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