Advantages of LTA:
- Exemption on Travel Expenses: LTA provides a tax exemption on the actual travel expenses incurred by an employee and their family within India. This can be advantageous if you enjoy traveling and frequently undertake domestic trips with your family.
- Flexibility in Travel Destination: LTA allows you to choose any destination within India for your travel, giving you flexibility in planning your trips.
- Carry Forward: In case you are unable to utilize your LTA in a particular block year, you have the option to carry it forward to the next block year and claim it before the end of the following block year.
Advantages of HRA:
- Coverage of Rent Expenses: HRA provides a tax exemption on the rent paid by an employee for their accommodation. This can be advantageous if you live in rented premises and have significant rental expenses.
- Coverage of Living Expenses: HRA can help reduce your taxable income, as it is based on a percentage of your basic salary, which covers a portion of your living expenses.
- PAN Requirement: Unlike LTA, there is no mandatory requirement to provide the landlord’s PAN for HRA exemption, which can be beneficial if your landlord does not have a PAN.
Determining which tax benefit is more advantageous depends on individual circumstances and factors such as salary structure, rental expenses, and travel preferences. It is possible to claim both LTA and HRA exemptions if you meet the eligibility criteria for both allowances. However, it is important to note that the exemptions for LTA and HRA are subject to specific conditions, limitations, and the actual expenses incurred.
Standard Deduction in India: Meaning, Applicability, and Recent Changes
Standard Deduction is a fixed deduction from an individual’s taxable income, provided as a benefit under the Indian income tax regulations. It reduces the overall taxable income and helps in reducing the tax liability. Here’s an overview of the meaning, applicability, and recent changes related to Standard Deduction in India:
Meaning of Standard Deduction: Standard Deduction is a flat deduction allowed from the total income of an individual, irrespective of the expenses incurred. It is provided to help taxpayers meet their general expenses and reduce the tax burden.
Applicability of Standard Deduction: Standard Deduction is applicable to individuals earning income under the head “Salaries.” It is available to both employees and pensioners. Self-employed individuals and professionals do not qualify for this deduction.
Recent Changes in Standard Deduction: The Standard Deduction has undergone significant changes in recent years. Here are the notable updates:
- Reintroduction in 2018: In the Union Budget of 2018, the Standard Deduction was reintroduced after being abolished in the previous years. The government reintroduced it as a replacement for the earlier medical reimbursement and transport allowance exemptions.
- Amount of Deduction:
- For the financial year 2021-2022 (assessment year 2022-2023), the Standard Deduction is set at Rs. 50,000. This means that individuals can claim a flat deduction of Rs. 50,000 from their taxable income, regardless of their actual expenses.
- Effect on Other Allowances: The reintroduction of Standard Deduction has impacted other salary-related exemptions. The earlier medical reimbursement and transport allowance, which were separate exemptions, have been subsumed within the Standard Deduction. This means that individuals no longer need to provide medical bills or transportation expense proofs to claim separate exemptions.
It is important to note that the Standard Deduction is a fixed amount and does not depend on the actual expenses incurred by the individual. It is provided uniformly to all eligible taxpayers.
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