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  7. Leave Travel Allowance(LTA/LTC), How to use for Holidays and Travelling Free

Leave Travel Allowance(LTA/LTC), How to use for Holidays and Travelling Free

Updated on: 24 Mar, 2025 03:15 PM

Your boss has finally given you a break, and you know just the perfect place to spend your holiday. You look up the ticket prices, but even the cheapest flight is very expensive.

It's time to stop looking at the fares because you can actually save tax while on a holiday. Want to know how? By claiming your Leave Travel Allowance (LTA).

Contents

What is Leave Travel Allowance (LTA)/Leave Travel Concession (LTC)?

When it comes to saving tax, Leave Travel Allowance/Leave Travel Concession is one of the best friends that an employee can have. Leave Travel Allowance is an income tax exemption offered by an employer to his employee. As per this, the employer reimburses the travel expenses for the vacation taken by an employee. However, any other expense, such as food, shopping, lodging, etc., is not included in the exemption.

Who are considered as family members for LTA exemption?

The exemption is applicable whether you are traveling alone or with your family. So the travel expenses for your family are also reimbursable by your employer. But here's the thing: the Income Tax Department has described the word family. But For the purpose of the Income Tax Act and LTA, a family consists of:

  • Spouse;
  • Children;
  • Dependent Parents;
  • Dependent brothers and sisters.

How to Claim LTA/LTC

Only individuals can claim LTA for travel costs incurred for themselves and their family (spouse, children, dependant parents, and dependant siblings). There are certain conditions that one needs to fulfill in order to claim LTA/LTC.

Here are the Preconditions to Claim LTA:

  • The exemption is only on actual travel costs;
  • The travel exemption is available for the employee alone or with his family (spouse, dependent siblings/parents, children).
  • A valid proof of travel is required to claim the Leave Travel Allowance (LTA)
  • Available for only two children of an individual born after October 1st, 1998, including a step or adopted child;
  • Traveling Twice in a block of Four years is allowed.
  • Mode of travel should be air, rail, or any other public mode of transport;
  • Allowed for domestic travel and not for international travel.
  • Expenses like food and accommodation shall not be claimed.

Understanding Fare Exemptions

The fare is exempt as per the following conditions:

  1. If you are traveling by air, the price of an economy class ticket for the shortest route or the amount actually spent on airfare, whichever is lower in amount, or
  2. If you travel by rail, the First class ticket for the shortest route or the amount actually spent on train fare, whichever is lower, or
  3. If you, however, want to travel by any other mode -the exemption is limited to first-class, deluxe, or AC first-class fare by the shortest route.
  4. However, if you have traveled via. an unrecognized public transport system, then you can claim an amount equal to the AC first-class rail fare by the shortest route as if the journey had been performed by rail.

LTA/LTC: What You Need to Know to Maximize Your Tax Savings

Block Year

A block year is different from a financial year and is set by the government for the purpose of claiming an LTA exemption. Each block consists of 4 years each. The list of block years is 1986-1989, 1990-1993, 1994-1997, 1998-2001, 2002-2005, 2006-2009, 2010-2013 and so on. The current year block is 2022-2025.

You can carry forward your LTA/LTC:

The government lets you carry forward your unclaimed LTA to the first year of the next block. This means if you have claimed only 1 LTA in the previous block of 4 years, you can carry forward and utilize the 2nd LTA and claim it in the first year of the next block. However, if you are unable to claim it in the first year, you will lose the opportunity.

Suppose the 4-year block for your LTA is 2014-2017. During this period, if you have not claimed your LTA or if you have claimed it only once, then you will be allowed to carry forward 1 LTA to 2018 (first year of the next block, i.e., 2018-21). However, If you do not claim it in 2018, it will lapse.

What if you have 4 Children?

The applicability of restriction of two children, in such cases, is different. If, after having one child, you have more than 1 child (twins, triplets, quadruplets, etc.) on the second occasion, then they are considered as one child for the purpose of LTA. Thus, such expense on their travel ticket is allowed.

Block Year is different from Financial Year

Yes, These block years are different from Financial Years and are created by the Income Tax Department.

What is the Procedure to Claim LTA?

The process for claiming a Leave Travel Allowance (LTA) exemption may vary by employer but generally requires submitting proof of travel and a declaration. While not always mandatory, it's best to keep copies of travel documents for personal records and provide them if requested by tax authorities. To claim LTA exemption, employees usually need to submit Form 12BB along with travel expense proofs, such as bus or train tickets, car rental receipts, and air tickets with boarding passes. These documents should be submitted to the employer within the relevant financial year to avoid issues during income tax return filing.

LTA Exemption for Vacation on Holidays

Many companies allow LTA exemption only if the employee takes leave and travels during those leave days. Traveling on official holidays or weekends might be disallowed.

The beaches of Goa are calling you! Or will it be a chill trip to Andaman and Nicobar with your family this time around? Forget all about the world and travel like that Wanderlust in you! Still not sure how to calculate and claim LTA/LTC? Get the help of our tax experts; Book eCA Now!

Frequently Asked Questions

Q- What is the difference between LTA and LTC?

LTA and LTC are two terms used interchangeably for the same tax benefit. LTA stands for Leave Travel Allowance, while LTC stands for Leave Travel Concession. Both refer to the exemption of travel expenses incurred by an employee for a vacation within India.

Q- What are the conditions for my family to claim LTA/LTC?

You can claim LTA/LTC for your family members if they travel with you or separately. However, your family for this purpose includes only your spouse, children, dependent parents, and dependent siblings. You can claim LTA/LTC for only two children born after October 1, 1998, unless they are twins or multiple births.

Q- What are the documents required for claiming LTA/LTC?

You need to submit Form 12BB along with proof of your travel expenses, such as boarding pass, rail tickets, travel agent's invoices, etc., to your employer. You also need to provide the details of your family members who traveled with you or separately. Your employer will deduct the LTA/LTC amount from your taxable income and issue you a Form 16. You do not need to submit any proof to the Income Tax Department, but you should keep them for your records.

Q- Can an employee carry forward their unused LTA entitlement to the next block?

An employee can carry forward their unused Leave Travel Allowance (LTA) to the first year of the next block if they haven’t fully utilized it in the current four-year block.

Here’s how it works:

  • LTA is granted in blocks of four calendar years.
  • If an employee has claimed only one LTA or hasn’t claimed any in the current block, they can carry forward one unclaimed LTA to the first year of the next block.
  • The carried-forward LTA must be used in the first year of the new block; otherwise, it will be forfeited.

Q- If someone wishes to save tax for FY 2024-25 now, then can they claim LTA?

If you choose the old tax regime, you can claim Leave Travel Allowance (LTA) and avail of the tax exemption. However, under the new tax regime, LTA is fully taxable. To avail of the LTA exemption, employees must take care of the following

  • Make sure you meet all the eligibility conditions for claiming the LTA exemption.
  • Gather all the required documents like expense proof, tickets, boarding passes and invoices and submit all of them to the employer.
  • They should submit Form 12BB along with the travel documents before the employer’s deadline.
  • The exemption is limited to the actual travel cost incurred or the LTA amount provided by the employer, whichever is lower.

Example:

  • If LTA provided = ₹25,000 and travel cost = ₹35,000, exemption is ₹25,000.
  • If LTA provided = ₹25,000 and travel cost = ₹20,000, exemption is ₹20,000.

Q- How to claim LTA in case of a job change?

An employee can still claim LTA exemption after changing jobs, but certain conditions apply:

  • If the job change happens within the same 4-year block and the employee hasn’t fully used their LTA with the previous employer, they can claim the remaining LTA with the new employer.
  • If the employee has already claimed LTA for the block period with the previous employer, the new employer will not allow another claim for the same block.
  • The new employer may require a declaration or proof of previous LTA claims to avoid duplication.
  • The employee must undertake eligible travel and submit supporting documents (travel tickets, boarding passes, etc.) along with Form 12BB to the new employer before the deadline.

Q- How to claim LTA for multi-destination travel?

If an employee travels to multiple cities during a vacation, the exemption is based on the round-trip fare for the farthest destination via the shortest direct route.

Here are some important points to remember -

  1. Only Travel Costs Are Covered. Expenses for local transport, accommodation, sightseeing, meals, or shopping are not covered.
  2. If multiple destinations are visited, the LTA exemption will be limited to the cost of the round-trip travel between the employee's home city and the farthest destination (shortest direct route).
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Kamal Murarka

Kamal Murarka
Director - Tax Research & Operations

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Kamal Murarka, a Chartered Accountant, is the Director- Tax Research & Operations at Tax2win. He has been with the company since its inception, contributing his expertise in national and international tax assignments. He is also a recognized speaker on tax-related topics, representing Tax2win at various industry forums. His deep knowledge and strategic insights have been crucial in shaping Tax2win’s approach to tax research, operations, and client solutions, driving the company’s continued success.