Dear Vikram ji,
LTA means Leave Travel Allowance or Leave Travel Assistance. If it is allowance given through salary, it is taxable irrespective of expenditure incurred as it is an allowance and under income tax act, only those allowances will get expemption as specifically mentioned in the Act whereas if it LTA is in the form of assistance / concession, an employee is entitled to exemption under section 10(5) of Income Tax Act in respect of the value of travel concession or assistance received by or due to him from his present or former employer for himself and his family, in connection with his proceeding :-
a) on leave to any place in India
b) to any place in India after retirement from service or after the termination of his service.
The exemption shall be allowed subject to the following:-
(i) Where journey is performed by air --- Maxim exemption shall be an amount not exceeding the air economy fare of the national carrier
the shortest route to the place of destination;
(ii) Where place of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other
than by air -----Maxim amount shall be an amount not exceeding the air-conditi9ned first class rail fare by the shortest route to the
place of destination; and
(iii) Where the places of origin of journey and destinatiion or part thereof are not connected by rail and the Journey is performed between
such places-----The amount eligible for exemption shall be :-
(A) Where a recognised public transport system exists, an amount not exceeding the ist class or deluxe class fare, as the case may
be, on such transport by the shortest route to the place of destination; and
(B) Where no recognised public transport system exists, an amount eqquivalent to the air-conditioned first class rail fare, for the
distance of the journey by the shortest route, as if the journey had been performed by rail.
-->> EXEMPTION WILL IN NO CASE EXCEED ACTUAL EXPENDITURE INCURRED ON THE PERFORMANCE OF JOURNEY.
--->> EXEMPTION CAN BE CLAIMED IN RESPECT OF ANY TWO JOURNEY IN A BLOCK OF 4 YEARS ( PRESENT BLOCK IS 2010-2013)
--->> EXEMPTION SHALL NOT BE AVAILABLE TO MORE THAN TWO SURVIVING CHILDREN OF AN INDIVIDUAL AFTER 01-10-1998
--->> EXEMPTION IS ALLOWED ONLY IN RESPECT OF FARE. Expenses incurred on prterage, conveyance from residence to the railway
station/ air port/ bus stand and bakc, boarding and lodging or expenses during the journey will not qualify for exemption.
GRATUITY:->>>
Gratuity is a payament made by the employer to an employee in appreciation of the past service rendered by the employee. It can either be received by :- (a) the employee himself at the time of retirement/ resignation; or
(b) the legal heir on the event of of the death of the emplouyee.
Gratuity reeceived on retirement/ resignation is taxable under the head " Salary" whereas received by the legal heir of the deceased employee is also taxable under the head "Income From Other Sources". In both the cases, the gratuity is exempt upto a certain limit under section 10 (10) of the Income Tax Act.
Sec 10(10)(i) deals with the gratutiy amount paid to the govt / local authority employees
Sec 10(10(ii) deals with the exemption amount of gratuity paid under the payment of Gratuity Act 1972 and
Sec 10(10)(ii) deals with the other cases
The Maxim Exemption amount is Rs3.50 Lakhs which has been increased to Rs 10.00 Lakhs w.e.f. 24.05.2010
Thanks
YCB