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Leave Travel Allowance (LTA): Claim, Rules, Exemption & Eligibility

Updated on: 16 Jan, 2024 05:49 PM

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!

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.

What are the conditions to claim Leave Travel Allowance exemption?

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 there in the salary structure of the employee.
  • The exemption can be claimed for up to two children if born on or after 1st October 1998. For children before this date, there would be no restriction. The exemption can be claimed for all dependent children traveling with the employee born before 1st October 1998. Further, in cases of multiple births on a second occasion after having one child is 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 cannot carry forward their LTA entitlement to the next block year. 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 through the shortest possible route through 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.

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.

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 would not be allowed to be claimed later on.

Claiming LTA in case of a job change

Even if the employee changes his/her job, an LTA exemption would be available. If the change happens within the block of 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 would be allowed by the new employer.

Claiming LTA for multi-destination travel

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.

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.

What expenses can be included 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.

What is the procedure to claim Leave Travel Allowance?

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 that 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.

Schedule a consultation with our experienced tax advisors, who can provide personalized guidance on LTA exemption and help you optimize your tax-saving strategies.

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Frequently Asked Questions

Q- If the employee takes one journey in the block of 2022-23, by when the unclaimed LTC should be claimed in the next block?

The unclaimed LTC exemption should be claimed within the year 2025 if it is carried forward to the next block.

Q- Is LTA exemption available in the new tax regime applicable from the financial year 2022-23?

No, LTA exemption would not be allowed under the new tax regime which is applicable from the financial year 2022-23

Q- If the employee’s parents-in-law travel with him, would the travel costs for the parents-in-law be claimed as an exemption?

No, LTA exemption cannot be claimed for travel costs of parents-in-law.

Q- Which section of the Income Tax Act allows an exemption for LTA?

Section 10 (5) of the Income Tax Act, 1961 allows LTA exemption.

Q- If the boarding pass is lost, can LTA be claimed?

LTA can be claimed if the boarding pass is lost. However, allowing LTA exemption would depend on the employer. The employer might or might not allow the exemption if the boarding pass is unavailable and subject to the availability of the other proofs.

Q- If the employee's wife travels with him, would her travel costs be allowed as an exemption?

Yes, the travel costs of spouses can be claimed under LTC exemption.

Q- Can only the travel costs of the family members be claimed as LTA if the employee does not travel?

No, if the employee does not travel, no LTA exemption would be allowed even if the family members travel.

Q- What would happen if the employee did not travel in a block of four years?

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.

Q- Can return airfares on international trips be claimed under LTA?

No, international travel is not covered under LTA. Thus, return fares on such travel would not be allowed as an exemption.

Q- Can I claim LTA exemption twice in one financial year?

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.

CA Abhishek Soni
CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.