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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, siblings, 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 Various Modes of Transport
| 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. |
When Can You Travel?
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.
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