Things you need to know about your Leave Travel Allowance (LTA)

There are dual benefits for Indian employees about traveling. While you take an official break for traveling any destination in India with your family, you also save tax on your travel expenses with LTA, which is provided by employer. It is only smart to make most of this benefit. This post aims to elaborate on certain features of LTA as a savings tool.  

What is LTA?

• ·         #Leave Travel Allowance is an allowance provided by employers for domestic travel for the employee and immediate family
•         It covers only the travel expense by air, train incurred during the travel, it also covers taxi and auto rickshaw only if train route is absent
•      It covers the travel expenses incurred by the individual and their immediate family. Other family members are excluded from availing Leave Travel Allowance
•         One can make a claim only twice in a block of four years, the present block is Jan 2014 – Dec 2017
•      #LTA also can be carried to the next block if it is not utilised, if under utilised the balance amount can be added
•          International travel expense cannot be claimed under LTA
•          You can claim your Leave Travel Allowance if you haven’t travelled, but the amount will come under taxable income
•         LTA is fully tax exempted under Section 10(5) of the Income-Tax Act, 1961, Rule 2B

Limitation of LTA

Like any other exemption rules, LTA also has its limitations. The companies have certain eligibility criteria for LTA.  If the allowance of the previous block is not exhausted, then one journey can be carried forward to the next block. However, the balance has to be exhausted within the first year of the next block. The allowance is capped by employers; the claims above the exemption limit will not be processed. LTA can only be claimed if the employee is part of the travel, family including spouse, children, brother and sister if they are dependants.

How you make most of LTA

As you can only claim twice in 4 year block, planning in advance helps. Ensure, you are taking prior written permission from the employer. Though air travel is allowed, it covers the minimum airfare of economy class. The road travel exemption is limited to the AC1 rail fare by the shortest route.

You need to keep the proof of your travel, tickets and copy of e-tickets in place.

Innovations in claiming LTA online – to help HR professionals an employers

Zeta, a Fintech startup, recently launched fully digital Leave Travel Allowance (LTA) solution, #Optima LTA Card, to help organisations manage employees’ leave travel allowance claims/ reimbursements digitally and enable employees to submit claims instantly. Built on digital platform, is designed to process LTA claims the paperless way. Employees are now empowered to submit their travel claims digitally and thereby avoid extensive paperwork. It is compliant with all legal mandates set by the Income Tax Department. Zeta team at the back-end tracks the shortest distance between two destinations using a government-approved database and thereby enable accurate assessment.

Also Read - 10 investment ideas for happy 2017

Organisations can be free of verifying paper bills manually since all verifications will be handled by Zeta Optima at the back end. Human Resource professionals can use this platform to digitally store bills for over seven years and can track LTA bills and claims online.

Happy traveling :) 

10 reasons Why we are obsessed about ELSS mutual funds

#ELSS is a clear winner amongst the Tax saving instruments in India 

Under section #80c of the Income tax act, there are many instruments one can opt for to save tax and create a wealth kitty. In the last post on Tax saving instruments under section 80C, I have listed down all the options of investments, insurance and expenditures. Here, I would like to elaborate on the specific product “Equity Linked savings scheme” Mutual Funds, and a basic comparison with the other options in terms of liquidity, lock-in, potential return etc.

Let me begin with the table of popular investment tools under 80C and their features.

Instrument	Maximum investment amount	Lock-in	Potential return	Actual tax benefits
#PPF	Rs. 1,50,000	15 years.	8-9% per annum, compound interest	Triple exemption benefit
Sukanya Samrudhi Yojana	Rs. 1,50,000	Only for daughters, the lock in depends on the daughters age	8-9%, compound interest	Triple exemption benefit
NSC	Rs. 1,50,000	5 years	8-9% per annum, compound interest	Returns are taxed as per laws
#Tax saver Deposits	Rs. 1,50,000	5 years	7-9% per annum, compound interest	Returns are taxed as per laws
#ULIP	Rs. 1,50,000	10 years onwards.	As per equity market movement. After deducting various charges	Triple exemption benefit
#ELSS mutual funds	Rs. 1,50,000	3 years	As per equity market movement.	Triple exemption benefit
#RGESS	Rs. 50,000	3 years	As per equity market movement.	50% tax relief on returns

1. The mutual fund has minimum #lock-in period of 3 years amongst the tax saving instruments.

2. Though it has a lock-in period, the open ended #ELSS funds, don’t have a maturity date.

3. The funds come with multiple options of growth, dividend option (dividend reinvestment is currently discouraged by the regulator in recent times, hence getting discontinued for the new investment options, because of its complex nature of 3 year llock-in for every purchase)

4. The ELSS schemes enjoy triple tax exemption benefits on redemption

5. Unlike PPF, ULIP, ELSS mutual funds don’t carry an obligation of investment amounts, hence it could be an one time investment or repeat depending on investor’s wish. 

6. Unlike insurance plan, investor can buy different plans basis his research and recommendations

7. Minimum investment is as low as Rs. 500/-

8. The dividend earnings are tax-free in the hands of the receivers  

9. It can be held as long as the investor wants; hence, the potential of high returns of 12-15% can be easily achieved in long-term, 5-7 years period.  

10. The cost of investment is very low compared to the insurance products (<3%) which doesn’t reflect  too much as the returns on the investment over a long term compensate well beyond the cost implications and inflation.  

A hypothetical return graph of tax saving instruments over 3, 5, 7.10 year period

	initial investment	3 YEARS	5 YEARS	7 YEARS	10 YEARS
PPF	1,00,000	130864	156568	187320	245135
NSC	1,00,000	127023	148984	174742	221964
ELSS	1,00,000	156394	210718	283911	444021

Assuming a 15% return on ELSS for the period

Top 5 #ELSS Mutual funds for reference purpose -

Scheme name	1 year	2years	3 years	5 years
ICICI Pru RIGHT Fund (G)	10.9	7.2	24.4	21.2
Axis Long Term Equity Fund (G)	8.8	9.2	26.5	21.0
Reliance Tax Saver (ELSS) (G)	13.9	6.2	29.9	20.4
DSP-BRTax Saver Fund (G)	20.1	12.7	25.5	19.7
Birla Sun Life Tax Plan (G)	12.6	12.3	24.5	18.1

Suggestion for the young investors would be to buy ELSS fund, and treat it like  a PPF account, invest regularly, preferably through SIP, for 15 years and stay invested through the term. You will end up saving a big amount for yourself. :) Happy investing. Happy Saving! 

10 changes at Provident fund in last one year has redefined how Provident fund serves Indian work force

Latest – App to check PF balance, regularising inoperative PF accounts, earning 8.8%

As you are reading my article, which is available only for online readers, chances are very high that you can easily trace and access your unclaimed/ inoperative PF accounts. Many a times its sheer inertia, sometimes documentation issues, complication with previous organisation holds many professionals update the PF account when they quit/change jobs. There are other reasons like shifting cities, relocating to different country or death of the account holders of creating a pool of 42,000 crore in 9.7 crore account. I appreciate the move of Government of India to continuing paying interest on these accounts. 

EPF is an important saving cum investment instrument for mre than 10 crore indian employees. With the new rules, employees are benefited for smooth tracking and transactions. A Big Thank you to the Modi Government. It is not all roses without thorns, there were  major retaliation by public on few proposal by government this budget, one was taxation on PF accrued.

I have also not yet forgotten the July 2016 proposal of finance ministry of utilising portion of the funds from inoperative accounts to be utilised in senior citizen welfare schemes. Owing to strong opposition and pressure from labour unions, the government actually did an U-TURN and made it an opportunity by regularising the PF accounts. Not only increasing the social security,  government also managed to garner some popularity of working class vote bank.  

There has been some interesting update on the Employee Provident funds in India during last one year. Listing down some important developments.

• ·         PF claims in cases of death set to be settled in a week
  ·         PF claim settlement period brought down to 20 days
  ·         EPFO does away with employer’s signature for PF withdrawal
  ·         Employees’ Provident Fund Organisation orders EPF to be released before retirement
  ·         UAN is a must for smooth transfer of Provident Fund
  ·         EPFO to pay 8.8% interest on "inoperative" accounts: Govt to issue notification soon
  ·         Employees’ PF Organisation services soon at 2 lakh common service centres of IT Dept In a move to increase participation in the indian equity market, EPFO has invested over Rs 9000 crore in Exchange Traded Funds
  ·         No tax would be deducted at source for PF withdrawals of up to Rs 50,000 from June 1.
  ·         CMPFO launches app to view PF balance

  All’s well which ends well. Hope government keeps up with its promises to the working class Indians and doesn’t interfere with this money. 

   About EPF

     Employee Provident Fund is one of the most important employee benefit scheme in India. The product is not an optional instrument. For every registered organisation with 20 employees has to mandatorily register for EPF (except exempted quota). A company can voluntarily register for EPF with employees less than 20.