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Leave Travel Allowance Exemption: Rules and Regulations
Leave Travel Allowance (LTA) is a tax exemption provided to salaried individuals under the Income-tax Act, 1961. It is a part of an employee's Cost to Company (CTC) package and is designed to exclude the expenses of travel on leave from taxable income. Employees can claim LTA for travel expenses incurred during leave periods, and it is applicable for two journeys in a block of four calendar years. However, it's important to note that if an individual opts for the new tax regime, this exemption is not available. In this article, we will discuss about the various provisions and conditions for claiming leave travel allowance.
What is Leave Travel Allowance?
LTA is the remuneration that you get from the employer when you are on leave with the family or alone. It is the most common form of tax exemption given to employees by most employers. It is not allowed for overseas destinations. Leave Travel Concession includes the cost of travel only; it doesn't include the cost of accommodation & other costs. You can claim LTC on the basis of expenses actually incurred by you on traveling to any place in India, either on holiday or on leaving the job and going to any other place either to take up another job or otherwise. Travel cost of family members can also be claimed under LTC. For this purpose, family includes your two children, your wife, whether dependent or not, your siblings, and parents who are mainly dependent on you.
What are the Conditions for Claiming Leave Travel Allowance Exemption?
You must fulfill the below-mentioned conditions for claiming Leave Travel Allowance -
- You must have undertaken the actual journey to claim the exemption.
- The exemption applies only to domestic travel within India; international travel is not covered under LTA/LTC.
- The exemption is applicable to the employee alone or with their family, including their spouse, children, and dependent parents, or siblings.
- The exemption is limited to a maximum of two children born after October 1, 1998. There are no restrictions for children born before this date, and the restriction does not apply in cases of multiple births after having one child.
Taxability of Leave Travel Allowance
Different employers give different amounts as leave travel allowance depending upon the position at which the employee is working. LTA exemption comes under section 10(5) of the Income Tax Act. The amount of LTA received is taxed as:
| LTC received | XXX |
| (-) LTC Exempt | (XXX) |
| Amount Chargeable to tax | XXX |
You can get the exemption only for the amount you are eligible for and not for the actual amount spent on your travelling. For Example, if your LTA amount is INR 25,000/-, but you have spent INR 30,000/-, you’ll get an exemption only for INR 25,000/-. And if you have spent INR 15,000/-, you’ll get an exemption of INR 15,000/- only, and on the remaning INR 10,000/- you’ll have to pay tax.
Exemption of LTA on Multi-Destination Journey and Various Modes of Transport
Income tax provision offers exemption for travel expenses incurred while on leave to travel across India. But the exemption is also subject to conditions regarding the mode of transport and specifies that the journey must be from the place of origin to the place of destination using the shortest possible route.
Therefore, if an employee travels to multiple locations during a single vacation, the exemption is limited to the eligible travel expenses for the journey from the origin to the farthest place visited, calculated using the shortest available route.
| Sl. No. | Journey through (Mode of travel) | Limit under LTA |
|---|---|---|
| 1. | Air |
Least of the following - Actual Expense - Airfare of economy class of a national carrier via the shortest route. |
| 2. | Any other mode: | |
| i) | Rail service available |
Least of the following - - Actual Expense - first-class AC rail fare by the shortest route |
| ii) | Rail service not available | Nil |
| a) | No recognized public transport system |
Least of the following: - Actual Expense - 1st class rail fare, for the distance of the journey by the shortest route. |
| b) | A recognized public transport system exists. |
Least of the following - - Actual Expense - 1st class or deluxe class fare by the shortest route. |
What is block year in LTA?
You can claim an exemption for upto two journeys in a block of four calendar years. The current block is 2022-25. For Example, if you travelled during the month of January 2022, it will fall in this block, since it is applicable on calendar year.
If you don’t travel within a block, you can carry forward the leave travel balance to the next block.
What if Both Husband and Wife are Eligible for LTA?
If both spouses are eligible for LTA, then both of them can claim LTA individually. But they can’t claim LTA for the same journey. They can claim the exemption for separate journeys or divide the expenses.
Other Relevant points:
- If LTC is encashed without performing journey, no LTC exemption shall be allowed and entire amount received by employer would be taxable.
- Family for this purpose means the spouse and 2 children. It also includes parents, brothers and sisters of the employee who are wholly or mainly dependant on him.
- The exemption can be taken for the journey undertaken while on leave during the tenure of service or even after retirement/termination of service.
- LTA exemption is only available in respect of fare.
So plan your holidays; enjoy the trip. Come back, claim the LTC & save taxes.
Want to maximize your tax savings and never miss out on any potential deductions you might be eligible for? Connect with our tax experts and file your ITR. Hire an online CA now!
Frequently Asked Questions
Q- Who can claim LTA?
Only individuals (citizens and non-citizens) can claim LTA for travel costs incurred for themselves and their family (spouse, children, wholly or mainly dependent siblings, parents).
Q- How much exemption can be claimed?
The exemption is available only on the actual travel costs incurred (air, rail, or bus fare). No expenses such as local conveyance, sightseeing, hotel accommodation, or food are eligible for this exemption.
Q- Can LTA exemption be claimed on every vacation?
No, LTA exemption is available for only two journeys performed in a block of four calendar years.
Q- What is the current block year for claiming LTA?
The current block year is 2022 to 2025.
Q- Can LTA exemption be claimed if I choose the new tax regime?
No, the tax exemption of LTA is not available if you choose the new tax regime.
Q- What if I haven't availed LTA in the previous block?
If you haven't availed LTA in the previous block, you can carry over one such unavailed LTC exemption to the next block, provided you avail this benefit in the first calendar year of the immediately succeeding block.
Q- Can LTA exemption be claimed for multi-destination journeys?
Yes, but the exemption can only be availed for the travel cost from the place of origin to the farthest place in the vacation by the shortest possible route.
Q- Can LTA exemption be claimed for travel on holidays?
Many organizations allow LTA claims only if the employee applies for leave and travels during that time. Travel on official holidays or weekends may not be eligible for LTA exemption.
