File your ITR Hassle-Free and Maximise your Refunds
Trusted by 1 Million+ Users
4.8 Star User Rating
Authorized by Tax Department
Are you looking for a tax-saving measure that allows you to enjoy a much-needed vacation? Look no further than Leave Travel Allowance (LTA). LTA is a popular tax benefit provided by employers to their employees, allowing them to save taxes on travel expenses incurred during their vacations within India. In this blog, we will delve deeper into the concept of LTA, how it works, and the rules and regulations surrounding it. So, let's begin!
Leave Travel Allowance is a tax-free allowance employers offer employees as part of their salary component. Under this allowance, the costs incurred by the employee on taking a trip for leisure purposes are allowed as a tax-free expense. Employees can, therefore, take a leave from work and travel on vacation, and the costs incurred would be allowed as a tax-free allowance by the employer. The exemption is allowed twice in a block of four years. Employees must submit the bills and travel documents to their employer to avail of the LTA tax benefit. The exemption is allowed only for the expenses incurred during the travel period and is subject to certain conditions.
To claim an exemption for LTA, employees should fulfill the following conditions -
The employee must actually travel to be eligible for LTA. Claiming LTA without actually traveling is not permitted.
The quantum of LTA exemption, which can be claimed as a tax-free expense, depends on the actual cost incurred on travel. The expense incurred on booking a journey from the employee’s place of origin to the place of travel and back is allowed as an LTA exemption. The journey should, however, be undertaken using the shortest possible route, which is air, rail, or bus. Only the cost of tickets booked for travel would be allowed as an exemption. Costs incurred on conveyance, sightseeing, accommodation, shopping, food, etc., would not be allowed. If the LTA allowance offered by the employer is lower than the actual cost incurred on traveling, the exemption would be limited to the LTA allowed by the employer and not the actual costs incurred.
For instance, if the employer allows an LTA of INR 25,000 and the employee incurs travel costs of INR 35,000 on booking travel tickets, LTA exemption can be claimed only for INR 25,000.
On the other hand, if the employee incurs a cost of INR 20,000, the exemption allowed would be INR 20,000 since it is lower than the actual LTC the employer allows.
The actual travel costs incurred on travel allowed for LTA exemption are determined based on the following rules.
LTA exemption is available for two journeys undertaken in a block of four years. However, if the employer does not take two journeys within the four-year block, only one unutilized LTA can be carried forward to the next block of years and claimed therein. However, to claim the unutilized LTA, the employee would have to take a trip in the first calendar year of the next block. If the unutilized LTA is not claimed within the first year of the next block, it will expire and will not be allowed to be claimed later on.
Even if the employee changes his/her job, an LTA exemption is available. If the change happens within four years and there is any unutilized LTA, it can be claimed with the new employer. However, if the LTA has been availed from the old employer, no new LTC will be allowed by the new employer.
If an employee goes on vacation and visits multiple cities, the exempted Leave Travel Allowance (LTA) amount will cover the cost of round-trip travel from their home city to the farthest city they visit and back. In other words, the LTA will reimburse the employee for the most expensive leg of their travel.
For instance, if the employee resides in Delhi and decides to go on vacation to Mumbai, Kolkata, and Chennai. The cost of round-trip travel from Delhi to Mumbai is ₹5000, from Delhi to Kolkata is ₹4000, and from Delhi to Chennai is ₹6000. In this scenario, the exempted LTA amount would be ₹6000, which is the cost of the round-trip travel from Delhi to Chennai and back. Even though the employee visited multiple cities, the LTA will cover the expense of the farthest city visited and the return journey, which in this case is Chennai.
Under the Income Tax Act, LTA is allowed only when the employee takes a leave from work and then travels on vacation. If the traveling is done on holidays, the same is not allowed for LTA exemption. Organizational practices might, however, differ. Some companies might allow LTA exemption even if the trip is taken on a holiday, while others might not allow exemptions in such cases.
Under the Indian Income Tax Act, the following expenses can be included under LTA:
The procedure to claim Leave Travel Allowance (LTA) may vary depending on your employer's policies and procedures, but here are the general steps that most employees need to follow to claim LTA:
Schedule a consultation with our experienced tax advisors, who can provide personalized guidance on LTA exemption and help you optimize your tax-saving strategies. Consult with our expert tax advisors
Employees who fail to meet the deadline for submitting information regarding expenses or specific allowances to their employers can still potentially claim those expenses or allowances when they file their tax returns. However, certain allowances, like Leave Travel Allowance (LTA), pose challenges when claiming them after the deadline has passed. This is because the responsibility for tax deduction lies with the employer upon submission of proof by the employee. Also, if there is a major difference between the Form 16 generated by the employer and the return filed by the employee, it can increase the chances of issuing a notice by the Income Tax Department.
If you have opted for a new tax regime at the start of the year by informing your employer and later you decide to opt for the old tax regime and claim LTA benefits, then yes, you can move to the old tax regime at the time of return filing. For claiming LTA benefits, you must ensure that the LTA component is there in your salary slip, and also, this benefit can be taken two times in a block of 4 years. The current LTA block is 2022 to 2025.
If the unclaimed LTC exemption is carried forward to the next block, it should be claimed within 2025.
No, LTA exemption would not be allowed under the new tax regime which is applicable from the financial year 2023-24.
No, an LTA exemption cannot be claimed for travel costs for parents-in-law.
Section 10 (5) of the Income Tax Act, 1961 allows LTA exemption.
LTA can be claimed if the boarding pass is lost. However, the employer's decision to allow the LTA exemption would depend on the situation. The employer might or might not allow the exemption if the boarding pass is unavailable, subject to the availability of the other proofs.
Yes, the travel costs of spouses can be claimed under LTC exemption.
No, if the employee does not travel, no LTA exemption would be allowed even if the family members travel.
If the employee does not travel in a block of four years, LTA exemption would not be allowed. However, one unutilized LTA can be carried forward to the next block.
No, international travel is not covered under LTA. Thus, return fares on such travel would not be allowed as an exemption.
No, only one LTC exemption can be claimed in one financial year. If you have taken two trips within the same financial year, the exemption would be allowed only on one trip.LTA exemption is allowed for a maximum of 2 times in a block of 4 years.
