ALeave Travel Allowance (LTA): Exemptions, Eligibility, & How to Claim?

Leave Travel Allowance (LTA) is a tax-saving benefit employers provide for salaried classes, allowing employees to claim tax exemptions on travel expenses incurred during vacations within India. As outlined in Section 10(5) of the Income-tax Act, 1961, LTA forms an integral part of an employee’s Cost to Company (CTC) package, helping to reduce payroll tax while offering a valuable financial perk. This exemption can be claimed for any two years within a block of four calendar years, making it an attractive option for salaried individuals seeking to optimise their tax savings. However, LTA exemptions are not available under the new tax regime. Find more information about Leave Travel Allowance (LTA), including exemptions, eligibility criteria, block year, unclaimed LTA, and how to claim LTA. Claim your Leave Travel Allowance & file your ITR with IndiaFilings tax experts!! [shortcode_37]

What is Leave Travel Allowance (LTA)?

Leave Travel Allowance (LTA) is a part of an employee’s salary package and is designed to cover travel expenses incurred during vacations. It allows employees to claim a deduction on travel costs for themselves and their family members within India, provided they meet certain conditions. The conditions or requirements to claim LTA are outlined in Section 10(5) of the Income Tax Act, 1961. LTA can be availed for travelling to any place in India and can be claimed when an employee is on leave, retired, or after the termination of their service. It includes costs for travel by air, train, or public transport but does not cover accommodation or food expenses.

Eligibility Criteria to Claim Leave Travel Allowance (LTA) Exemption

To be eligible for LTA exemption, an individual, whether a citizen or non-citizen, must incur travel expenses for themselves or their family members, which may include their spouse, children, wholly or mainly dependent siblings, and parents. The individual must undertake the actual journey and provide original proof of travel to their employer to substantiate their claim.

What are the Conditions or Requirements for Claiming LTA?

Here are the conditions or requirements for claiming LTA exemption under the Section 10(5) of the Income Tax Act, 1961,

Domestic Travel: LTA exemption is applicable only for travel within India. International travel is not covered.
Family Travel: The exemption can be claimed for the employee themselves or their family, which includes their spouse, children, wholly or mainly dependent parents, brothers, and sisters. However, there are restrictions for children born after October 1, 1998.
Frequency: LTA exemption is available for a maximum of two journeys within a block of four calendar years. If not availed during a block, it can be carried forward to the first year of the next block.
Proof of Travel: Valid proof of travel, such as tickets and bills, is essential for claiming the exemption.
Travel Routes and Class: There are specific rules regarding travel routes and the class of tickets eligible for exemption.
Exclusions: Other expenses like hotel, food, and stay cannot be claimed under LTA. Airport transfers are generally not allowed.
City Travel: Exemption for travel expenses within a city is not permitted

Travel Routes: The exemption is available for the shortest route from the place of origin to the place of destination.
Ticket Classes: The class of tickets eligible for exemption may vary depending on the employee's salary and other factors.

LTA Exemptions for Different Modes of Transportation

Find below the LTA exemptions concerning different modes of transportation,

Air Travel: The economy class airfare of the national carrier (Air India) by the shortest route or the actual expenditure incurred, whichever is less.
Rail Travel: If the origin and destination are connected by rail, the First Class AC rail fare by the shortest route or the actual amount spent, whichever is less.
Other Modes of Transport:
- Recognised Modes: If a recognised mode of transport exists for the route, the first class or deluxe class fare for the shortest route or the actual expenses incurred, whichever is less.
- No Recognised Mode: If there is no recognised mode of transport, the amount equivalent to the first class AC rail fare for the distance covered by rail can be claimed.

How much amount can be claimed under LTA

The LTA exemption is limited to the ‘actual travel costs’ incurred by the employee, such as air, rail, or bus fares. As mentioned, other expenses, including local conveyance, sightseeing, hotel accommodation, and food, are not eligible for this LTA/LTC exemption. Additionally, the exemption is limited to the LTA provision provided by the employer. For instance, if an employer grants an LTA of Rs. 50,000 and the employee spends Rs. 45,000 on travel, only Rs. 45,000 can be claimed as an exemption. The remaining Rs. 5,000 would be included in the employee's taxable income. Also read: House Rent Allowance (HRA)

Is it Possible to Claim LTA on all the Vacations?

No, it is not possible to claim LTA on all the vacations. It can be claimed for only two journeys performed during the block of four calendar years.

Block Year Condition for LTA

A block year, unlike a fiscal or financial 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.

Unclaimed LTA & How Will it Be Carried Over?

If an employee is unable to claim LTA within the current block period, the unclaimed LTA can be carried over to the next block. However, it must be claimed in the first calendar year of the new block. Failure to do so will result in the forfeiture of the unclaimed LTA. Additionally, suppose an employee has not availed exemption for one or two journeys in any of the four-year blocks. In that case, they can carry over one unavailed LTA exemption to the next block, provided they claim it in the first calendar year of the succeeding block.

How to Claim Leave Travel Allowance (LTA)?

The process for claiming a Leave Travel Allowance (LTA) exemption can vary slightly between employers but generally involves submitting proof of travel and a declaration. While not always mandatory, it's advisable to keep copies of travel documents for personal records and provide them to the employer if tax authorities request them. To claim LTA exemption, employees typically need to submit evidence of expenditure in Form 12BB. This can include original bills for travel, such as bus or train tickets, car rental receipts, and air tickets with boarding passes. It's important to submit these documents with the signed Form 12BB to the employer within the relevant financial year to avoid complications during income tax return filing. Learn more: Allowances exempted from Income Tax

Can LTA Exemption be applicable for the Vacation on Holidays?

Most organisations following the income tax provisions allow employees to claim LTA only if they applied for leave and travel during that time. Those organisations may reject LTA exemption claims for the travel during the official holidays or weekends.

Conclusion

In conclusion, Leave Travel Allowance (LTA) offers a significant tax-saving opportunity for salaried employees to claim exemptions on travel expenses incurred within India. Individuals can reduce their taxable income while enjoying vacations with their families by meeting specific criteria under Section 10(5) of the Income Tax Act. However, LTA exemptions come with conditions such as block periods, proof of travel, and limitations on travel routes and ticket classes. While it remains a valuable benefit under the old tax regime, employees must ensure compliance with the rules to leverage its advantages fully. IndiaFilings helps you with ITR filing & claim your LTA exemptions with expert guidance!! [shortcode_37]