Leave Travel Allowance
The Income Tax Act offers several tax benefits to employees, like house rental allowances and deductions on interest paid on house loans. The LTA is one such benefit provided by employers to employees that allows employees to save tax while enjoying a much-needed vacation.
While this may sound interesting, don’t pack your bags just yet! There are a lot of conditions to claim this exemption, so let’s delve deeper into LTA, its limits, eligibility, details on how to claim, and the latest updates.
What is LTA?
Leave Travel Allowance, or LTA, is an allowance provided by the employer to employees as a part of their salary component. Under this allowance, employees can take a leave from work and travel on vacation, and the costs incurred for this trip would be allowed as a tax-free allowance by the employer.
This exemption is available twice in a four-year block period, and the current block year is 2022–2025. One important point to remember is that the Leave Travel Allowance is not available under the new tax regime.
Who can claim LTA?
You must fulfil the following conditions in order to claim exemptions for LTA:
- LTA is only available for domestic travel.
- The cost incurred for the travel of family members will also be considered for exemption. Family includes spouses, children, dependent parents, and siblings.
- LTA components must be clearly mentioned in the employee’s salary structure.
- The exemption is not available to more than two of the person’s children who were born after October 1, 1998.
How much exemption can you claim?
- The exemption is limited to the LTA provided by the employer and also depends on the actual cost incurred on travel.
- Only the cost of tickets booked for travel would be allowed as an exemption, and the route booked must be the shortest route available.
- Expenses such as local conveyance, sightseeing, hotel accommodation, and food are not eligible for this exemption.
- LTA can be claimed for travel by any mode of transport, including air, train, or road.
- For air travel, the reimbursement amount will be either the actual expenditure amount or the cost of an economy-class ticket via Air India for the shortest route to the destination, whichever is lower.
SL NO | Mode of Transport | Limit under LTA |
1 | Air | Lower of the following amounts: – Actual Expenses or – Economy class air fare of the national carrier(Indian Airlines or Air India) by the shortest route to the destination. |
2 | If rail service is available | Lower of the following amounts: – Actual Expenses or – Air-conditioned first class rail fare by the shortest route to the place of destination |
If rail service is not available | ||
3. | Recognised public system is not available | Lower of the following amounts: – Actual Expenses or – 1st class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. |
4. | Recognized public transport system is available | Lower of the following amounts: – Actual Expenses or – 1st class or deluxe class fare by the shortest route to the destination |
Multi destination
If an employee is visiting multiple cities and wants to claim LTA, only the round trip from the home city to the furthest city will be covered by LTA. In other words, the employer will reimburse the most expensive part of the trip.
Vacation on holidays
LTA is only applicable when the employee takes a leave from work and then travels on vacation, but if the travel is done on holidays, it is not considered LTA under the Income Tax Act.
However, this might differ based on organizations, as some companies might allow LTA exemption even if the trip is taken on a holiday.
How do I claim?
The procedure to claim Leave Travel Allowance (LTA) may vary across different organisations and their policies. Some of the general steps to claim LTA are:
Apply for Leave Travel Allowance: Fill out the application form provided by your employer. Also submit all the relevant details of your travel, such as the date of travel, destination, mode of transport, and the cost incurred.
Submit proof of travel: Submit all the relevant documents, such as tickets, boarding passes, and invoices, that prove your travel, along with your application form,
Wait for approval and reimbursement: Your employer will verify your claim, once approved, they will reimburse the amount claimed as per their policy.
Unclaimed LTA?
If an employee does not claim LTA during the current block year, it can be carried over 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 will be forfeited, and the employee will need to wait for the next block year to claim LTA again.
LTA is a great way to cover your travel expenses, it enables employees to take a much deserved break.
But it is also necessary to properly plan your trip as LTA only covers the cost of travel between destinations and other expenses are not covered. It is still an allowance that employees should take advantage of. Remember to account for factors like block period, eligibility and also save documents like tickets, boarding passes just in case.
