Leave Travel Allowance (LTA) Guide: Rules, Tax Exemptions & Claim Process

What is Leave Travel Allowance?

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.

Who can claim LTA this year?

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 vacation should be taken only within India.
• Costs incurred for family members who travel with the employee would also be allowed as an exemption. The family members for this purpose would include spouses, children, dependent parents, and dependent siblings.
• LTA components must be included in the employee's salary structure.
• The exemption can be claimed for up to two children born on or after 1 October 1998. There would be no restriction for children born before this date. The exemption can be claimed for all dependent children traveling with the employee born before 1 October 1998. Further, multiple births on a second occasion after having one child are also not affected by this restriction.
• LTC exemption would be allowed for up to two journeys taken within a block of four calendar years. Block year refers to a specific period of four years, during which an employee is allowed to claim LTA for up to two trips. The current block year for claiming LTA started in 2022 and will end in 2025. If an employee does not claim LTA during the current block year, they are allowed to carry over such exemption to the next block provided they avail of this benefit in the first calendar year of the immediately succeeding block. After that, the unused LTA entitlement for the current block year is forfeited, and the employee will need to wait for the next block year to claim LTA again.
• LTA can be claimed for travel by any mode of transport, including air, train, or road.
• No LTA is allowed for hotel accommodation and food.

What is the eligibility of LTA exemption?

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.

How much amount can be claimed under LTA

The LTA amount is set and provided by the employer, hence can vary. ​​Suppose your employer provides LTA amounting to ₹30,000, and your actual travel expenses sum up to ₹25,000. In this case, you’re eligible to claim exemption only for the ₹25,000 you spent on travel, not for the entire LTA grant of ₹30,000.

The latest block period to claim LTA exemption is 2022 to 2025 which is the 10th block year. The tax exemption can be claimed twice within four years.

Block Year Condition for LTA

A block year is a specific period determined by the government for LTA exemption purposes. It consists of four years. The first block year began in 1986. Subsequent block years include 1986-1989, 1990-1993, 1994-1997, 1998-2001, 2002-2005, 2006-2009, 2010-2013, and so on. The current block year is 2022-2025, while the previous block year was 2018-2021.

Leave Travel Allowance Exemption Rules for Various Modes of Transport

The actual travel costs incurred on travel allowed for LTA exemption are determined based on the following rules.

• When the destination is not connected by any recognized public transport system directly If the destination is not connected directly by a recognized public transport, the exempted travel costs would be considered to be the fare of AC first-class rail tickets from the origin city to the destination city, assuming the journey is made by rail, and the shortest route is taken.
• When the destination is connected by all recognized public transport other than trains, If other modes of public transport connect the destination, but there is no train connectivity, the exempted cost would be the fare of first class or deluxe class on such transport for the journey taken using the shortest route.
• When the destination is connected by trains If the destination is connected by trains, the exempted cost would be the fare of an AC first-class train ticket for the shortest route, whether the journey has been taken by train or not.
• When the employee travels by air If the employee travels by air, the exempted cost would be the fare for economy class of a national carrier using the shortest route.

If you are planning to claim LTA against air travel, these are the things to keep in mind:-

Exemption for travel expenses is exclusively limited to domestic travel within India; international travel is not covered under LTA/LTC provisions.

• The exemption extends to the employee alone or with their family, including the employee’s spouse, children, and wholly or mainly dependent parents and siblings.
• For air travel, reimbursement is limited to the cost of an economy-class ticket via Air India for the shortest route to the destination or the actual expenditure, whichever is lower.
• Expenses such as local conveyance, sightseeing, hotel stays, and meals are not eligible for exemption. It's important to note that this exemption is solely applicable to LTA provided by the employer.

Unclaimed LTA

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.

What Travel Expenses Are Covered Under LTA?

Under the Indian Income Tax Act, the following expenses can be included under LTA:

• Travel Expenses: LTA covers the cost of travel for the employee and their immediate family members (spouse, children, and dependent parents or siblings). The travel can be undertaken either by air, rail, or public transportation, as per the specific rules defined by the employer or the Income Tax Department.
• Destination: LTA is meant for travel within India. Employees can claim expenses incurred on traveling to any place in India for their leave period.
• Mode of Travel: LTA covers expenses incurred on travel by air, train, or other public transportation. The expenses are eligible for reimbursement based on the actual amount spent or as per the limits set by the employer or tax authorities.
• Leave Period: LTA can be claimed for travel during the employee's leave period, which may include annual leave, casual leave, or any other form of approved leave.

How to claim LTA — a step by step process?

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:

• Check your eligibility: Ensure you are eligible for LTA and have completed the required years of service with your employer. Check the LTA rules and regulations specific to your employer.
• Plan your travel: Plan your travel in advance and select the mode of transport that you wish to use. Keep all the relevant documents related to your travel, such as tickets, boarding passes, and invoices.
• Apply for LTA: Fill out the LTA application form provided by your employer. Provide all the relevant details of your travel, such as the date of travel, destination, mode of transport, and cost incurred.
• Submit proof of travel: Along with your application form, submit all the relevant documents, such as tickets, boarding passes, and invoices, that prove your travel. These documents serve as proof of your LTA claim.
• Await approval and reimbursement: Your employer will verify your LTA claim and, once approved, reimburse the amount claimed as per their policy. The reimbursement may be processed as part of your regular salary or as a separate payment.

Conditions for Claiming LTA

If you're claiming Leave Travel Allowance (LTA) or Leave Travel Concession (LTC), here are the key rules you need to be aware of:

• Only Domestic Travel is Covered
  LTA/LTC exemption applies only to travel within India ????????. International trips are not eligible.
• Who Can Travel?
  • The exemption applies to the employee alone or with family.
  • ‘Family’ includes spouse, children, and wholly or mainly dependent parents, brothers, and sisters.
• Children Eligibility Criteria
  
  • No restrictions on children born before 1st October 1998.
  • For children born after 1st October 1998, the exemption is available only for two children.
  • However, multiple births (twins/triplets) on the second child are exempt from this restriction.
• What Expenses are Covered?
  • Only travel expenses (e.g., airfare, train tickets, or bus fares of a specific class).
  • Food, accommodation, and other personal expenses are NOT covered.
• Valid Proof is a Must!
  To claim the exemption, you must provide valid travel proof, such as tickets and invoices.

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

An employee can carry forward their unused Leave Travel Allowance (LTA) entitlement to the first year of the next block if they have not fully utilized it in the current 4-year block.

Here's how it works:

• LTA is granted in blocks of four calendar years.
• If an employee has only claimed one LTA in a block or has not claimed it at all, they are allowed to carry forward one unclaimed LTA to the first year of the next block.
• However, this carried-forward LTA must be utilized in the first year of the new block; otherwise, it will be forfeited.

Example:
The current LTA block year is 2022-2025 and you have either not claimed LTA or have claimed it only once, you can carry forward the unclaimed LTA to 2026 (the first year of the next block, 2026-2029). However, if you do not claim it in 2026, the benefit will lapse, and you will lose the opportunity to claim it.

Can we claim LTA and save tax under the new tax regime?

No, you cannot claim LTA and save tax under the new tax regime.

Under the new tax regime, LTA exemption is not available, meaning employees who choose this regime will not receive any tax benefits on LTA. Instead, the entire LTA amount will be fully taxable as part of their salary. Employees who wish to avail of LTA tax exemption must continue with the old tax regime, where LTA can be claimed as a tax-free allowance subject to conditions.

If someone wishes to save tax for FY 2024-25 now, then can they claim LTA? What needs to be done?

Yes, if you opt for the old tax regime, you can claim Leave Travel Allowance (LTA) and avail of the tax exemption. However, if you choose the new tax regime, LTA tax exemption is not available, and the entire amount will be taxable.

LTA is a component of your salary that covers the cost of travel during a vacation. Employees can claim tax exemption on LTA by following these steps:

Undertake Eligible Travel

• Travel must be within India.
• It should be for the employee and their eligible family members.
• The exemption covers only the cost of tickets for travel by air, rail, or bus.
• Other expenses such as accommodation, food, sightseeing, or local transport are not eligible for exemption.
• The journey must be made using the shortest route between the place of origin and the destination.

Keep Documentary Proof

• Employees must retain and submit proof of actual travel expenses, such as air/train/bus tickets, boarding passes, or invoices to their employers.

Submit Form 12BB

• There is no specific process under the Income Tax Act for claiming LTA exemption. However, as per Rule 26C of the Income Tax Rules, 1962, employees must submit Form 12BB along with supporting travel documents to their employer before the deadline set by the company.

LTA Exemption Limit

• The exemption is limited to the actual travel cost incurred or the LTA provided by the employer, whichever is lower.
• Example:
  • If an employer provides ₹25,000 as LTA, but the employee incurs ₹35,000, only ₹25,000 is exempt.
  • If the employee incurs ₹20,000, the exemption is limited to ₹20,000, even if the employer offers ₹25,000.

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How to claim LTA in case of a job change?

Even if an employee changes jobs, they can still claim LTA exemption, subject to certain conditions:

• Unutilized LTA Can Be Claimed with the New Employer If the job change occurs within the same 4-year block and the employee has not fully utilized their LTA with the previous employer, they can claim the remaining LTA with the new employer.
• No Double Claiming If the employee has already claimed LTA with their previous employer for the block period, the new employer will not allow another LTA claim for the same block.
• Submitting Proof of Previous LTA Usage The new employer may ask for a declaration or proof of previous LTA claims to ensure there is no duplication.
• Following the Standard LTA Claim Process The employee must undertake eligible travel and submit the necessary documentary evidence (travel tickets, boarding passes, etc.) along with Form 12BB to the new employer before the specified deadline.

Example:

• Suppose an employee worked with Company A from 2022 to 2023 and did not claim LTA.
• They joined Company B in 2024, which is still within the 2022-2025 LTA block.
• They can now claim the unutilized LTA through Company B, provided the employer offers LTA as a part of the salary structure.

However, if the employee had already availed LTA with Company A, they cannot claim another LTA with Company B for the same block.

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. The exemption covers only the most expensive leg of the journey, ensuring that the LTA benefit is applied efficiently.

Key Points to Remember:

• Only Travel Costs Are Covered
  • LTA exemption applies only to travel expenses (air, rail, or bus tickets).
  • Expenses for local transport, accommodation, sightseeing, meals, or shopping are not covered.
• Calculation for Multi-Destination Travel 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).

Example:

An employee residing in Delhi takes a vacation to:

• Mumbai (Round-trip cost: ₹5,000)
• Kolkata (Round-trip cost: ₹4,000)
• Chennai (Round-trip cost: ₹6,000)

Since Chennai is the farthest city, the LTA exemption will be limited to ₹6,000, which is the cost of the round-trip from Delhi to Chennai and back.

Claiming LTA for a vacation on holidays

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.

LTA vs LTC: What’s the Difference?