Confused About LTA in My Salary Offer: Will I Get It Monthly or Annually?

Hi, I have serious doubts about the LTA. I received an offer from a large company, and in the offer letter, they mentioned the following details: The fixed salary is broken up into 50% fully taxable and 50% flexible. The flexible portion includes medical expenses, food coupons, house rent allowance, travel expenses, and also LTA. I am clear about all other aspects except LTA. They included it as part of the salary breakdown, so will I receive the LTA amount monthly? They specified that we can claim LTA up to 1 lakh per annum. What will happen if I do not avail of LTA and accept the 1 lakh per annum/12 amount as my monthly income, which is taxable? Kindly advise.

Thanks,
Shiva

Let me succinctly put it. Your CTC is split into Base Pay & Flexible Pay. While base pay attracts PF & Gratuity deductions, flexible pay has to be opted by you. It is suggested to request the following components in the flexible pay.

1. Conveyance Allowance - Rs.800/- per month (no proof is required, fully tax-exempt)

2. Medical Assistance - Rs.1250/- per month (tax-exempt subject to production of bills)

3. Children Education Allowance - Rs.100/- per child per month (max 2 children) - Tax-exempt (bills to be produced)

4. LTA - If you opt for LTA, it is tax-exempt twice in a block of 4 years. You have to avail a minimum of 6 days PL and produce the train/air tickets for self and dependents to claim tax benefits. If you are not undertaking the travel, the LTA amount will be paid to you at the end of the year and the amount received will be treated as taxable income. LTA is not paid on a monthly basis.

5. 50% of the basic can be claimed as HRA (for metros) or 40% of basic (for non-metros) for claiming tax benefits.

If you still have doubts, revert.

Regards,
Ponraj

Dear Shiva, you can get LTA only if you have applied for leave from your company and have actually traveled. However, international travel is not valid. Only the travel costs are covered. So, whether you fly, hop on a train, or take public transport, you will have to show the ticket to claim your LTA.

LTA Coverage

LTA covers travel for yourself and your family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working), and children. You can claim the LTA benefit just once a year. If you switch jobs, you can get the LTA not only from your present organization but also from your former employer if the concession is lying unutilized.

Eligibility and Tax Implications

You must take the shortest route to your destination to be eligible for LTA. If your LTA is not utilized, it gets added to your salary, and you will be taxed on it. Hope this may clear your query.

Regards,

Dear Ponraj,

Thanks for the detailed information. I understand the various flexible plans. So, I can add my plans for 50% of the flexible salary, right, but with some restrictions on the maximum amount like HRA, Medical, etc.?

On LTA, they mentioned up to Rs. 1 lakh per annum. But I don't want any LTA and would like to get the amount monthly and am even ready to pay tax for the same. Is it possible to leave the LTA completely and get the salary monthly? Or else, how much minimum LTA can I add to my flexible plan?

Thanks,
Shiva

You can avoid LTA. I also excluded the LTA from my salary structure. The remaining amount will be put into a special allowance.

Regards,
Pon

Dear Pon, Thanks a lot. But I do have travel expenses separately of 9600, which is fixed. So the LTA amount will add to the flexible allowance, that's what you are mentioning, right?

Now I have to see how to reduce my tax. Can we exclude HRA, travel expenses, and food coupons completely from the total fixed amount? If my fixed amount is 7.5 lakh, how much tax do I need to pay after HRA, travel expenses, and food coupons of 15000rs per annum? Just provide some insight into the tax I need to pay per month.

Sorry to disturb you again; I'm just new to these tax issues.

Thanks, Shiva

Conveyance allowance is totally different from LTA. ₹9600 will be totally excluded from your taxable income. You need to produce only rent receipts for HRA and for claiming tax exemption. Don't exclude HRA.

Food coupons up to ₹2750 per month are fully tax-exempt. Go for it. All department stores are accepting the food coupons for the exchange of groceries and edibles in addition to select restaurants.

Regards,
Pon