How Is LTA Calculated?

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How Is LTA Calculated?
How Is LTA Calculated? (Image: g68: sxc.hu)

The Basics

"LTA" is an acronym used to describe a special kind of reimbursement granted by a government employer to employees living and working in India. You do not have to be an Indian citizen to qualify for LTA compensation--you just have to be living and working in India. It stands for "leave time allowance." It is compensation for travel during a vacation. A person eligible for the allowance should keep track of the amount of money he spends for vacation-related travel all throughout the year. Some companies will reimburse a person while others will make the person write off the expenses on his Indian income tax return. This means that if they were going to owe the government income tax they will have to pay less, and if they were getting a refund from the government it will be larger than it would have been.

Calculations

To calculate LTA add up all the total travel-related expenses from the trip in question. If four round-trip plane tickets were purchased add up the total cost. Do so for any expenses that qualify. Things like food and entertainment do not qualify. Check with your company's human resources department for clarification on what is eligible for reimbursement. Obtain an LTA reimbursement form from your employer and provide them with both the filled out form containing this calculation and proof of travel. They will provide you with your reimbursement in the form of a check.

Indian Income Taxes

If an employer insists that you write off LTA on your Indian income taxes enter the calculated number into the "Flexible Benefits" portion of your income tax return. This will be considered a deduction and the number will now be available when calculating the rest of your income taxes.

Regulations

There are a number of regulations to remember when calculating LTA. For starters, only people who have formally applied for LTA with their employer are eligible to receive it. Traveling internationally is also not allowed. A person does not get to write off all trip expenses--only the ones related to physically traveling to his destination. This includes plane tickets and train vouchers. Receipts must also be present to be able to claim LTA on Indian income taxes. Finally a person can claim the expenses of buying transportation for their family on LTA, but their family must have traveled with them at the time. If their family traveled separately either at an earlier or later date then LTA cannot be claimed. A person can only claim LTA once every two years.

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