FOR EXISTING POLICY
FOR NEW POLICY
Leave Travel Allowance (LTA) is a benefit given by employers to their employees to cover their travel expenses on leave. Besides, it can also help you save on taxes*. Find out more in the blog!
Leave Travel Allowance is an amazing benefit that can turn your travels into tax-saving opportunities. It is a great benefit for frequent travellers who are keen on managing their taxes* smartly.
LTA is basically a salary component that covers an employee's travel expenses when he is on leave. The good thing is this perk is tax-exempt under certain terms and conditions.
This blog will discuss everything you need to know about Leave Travel Allowance, LTA claim rules, LTA eligibility, and more.
What is Leave Travel Allowance (LTA)?
As discussed above, Leave Travel Allowance is a type of allowance provided by employers to employees who travel to any place when on leave, after retirement or even after ending their services. As per the Income Tax Act, 1961, Section 10(5), this benefit is eligible for tax exemptions.
Another important thing to note is that the LTA is not a part of an employee's net income.
Expenses Included Under LTA in Salary
The income tax exemptions under LTA can only be availed on actual travel expenses on road, rail, or airfares subjected to the below-mentioned conditions:
Air Travel: You can claim airfare for the economy class of Air India either by the shortest route or the actual cost incurred, whichever is less.
Rail Travel: If the destination and place of origin are connected by railways, then you can claim the expenses incurred on First Class AC rail fare or the exact amount spent, whichever is the lowest.
Other Modes: There are some cases when the origin and destination of travel are neither connected by rail nor air. In these cases, the following conditions are applied:
If the origin and destination of travel are not connected by air or rail, but a recognised transport such as a bus is available for the route, then you can claim the deluxe or First Class fare or the actual fare incurred for that transport.
If neither railway nor a recognised transport is available for the route, then you can claim the amount equivalent to the First Class AC rail fare, assuming that the journey has been completed via rail.
Who is Eligible to Claim LTA Reimbursement?
The leave travel reimbursement can only be claimed by individuals for travel expenses incurred for themselves, their spouse, their children, or dependent parents and siblings.
LTA Claim Rules: Requirements for Claiming LTA Tax Exemption
As mentioned earlier, LTA tax exemptions can only be claimed under certain conditions. Let us take a look at the LTA tax exemption rules:
LTA exemptions can only be claimed for an actual journey. You may be required to submit valid travel proof to claim LTA.
Leave Travel Allowance can only be claimed for travel costs. It means expenses on accommodation and food during the travel can not be claimed.
Only domestic travel is considered for LTA tax exemption. It means if you have travelled outside India, then you are not eligible to claim LTA exemptions.
LTA exemptions can only be claimed for travel by an employee or his dependent family. Here, the family of the employee includes his spouse, children, dependent parents, or siblings.
LTA exemptions can not be availed for more than two children of an employee born after October 1st, 1998. No such restrictions are applicable to children born before the specified date.
Moreover, multiple births for the second time after having one child are also free from this restriction. In simple terms, if you have twins or triplets during the second delivery before October 1st, 1998, then you can claim LTA exemptions for all your children.
Most importantly, LTA can not be claimed every year. It can only be claimed for two journeys made in a block of four years.
Note that the government declares the block years for LTA.
LTA can only be claimed when an employee has been on leave for travelling purposes. This period should be declared and marked as “leave” from work.
How Much Amount Can be Claimed for LTA Exemptions
Reiterating the fact, LTA reimbursement is only available for the actual travel expenses. It means you can only claim the travel cost incurred on rail, air, or bus fare. No other expenses, such as food, accommodation, sightseeing, conveyance, etc., are eligible for reimbursement. Moreover, the amount is limited to the Leave Travel Allowance offered by the employer.
For instance, if your employer has granted an LTA of ₹40,000, but the actual travel cost incurred is only ₹25,000, then you can only claim an exemption of ₹25,000. The remaining ₹15,000 will be added to the taxable income.
How To Claim Leave Travel Allowance Exemption?
Different employers have different claim procedures for LTA. Every employer declares the due date before which you have to claim the leave travel allowance. Further, you may also be required to submit travel proof documents such as boarding passes, tickets, invoices from your travel agent, etc.
While it is not a mandatory requirement by employers, it is always recommended to keep your proof of travel ready at the time of claiming LTA reimbursement or tax declaration.
Can I Carry Forward Unclaimed LTA to the Next Year Block?
Suppose you have not claimed your LTA exemption in the last block of the financial year or have claimed only once. In that case, you can claim one remaining LTA in the next block of financial years w.r.t carry-over concession rules under which you can claim travel leave allowance on three journeys completed in the current block of years.
However, you must claim one LTA in the first year for the next financial year block to claim this carry-forward facility.
For instance, you have made an LTA tax exemption once in the previous block of year, i.e. 2017-2020. In this case, you are eligible to claim one additional LTA in the next year's block 2021-2024. However, you should make your claim in the first year of the next block, i.e. 2021.
Final Thoughts
Understanding Leave Travel Allowance helps you plan vacations in a financially savvy way and also helps you save on taxes. You can avail the tax-saving advantages of LTA by following the specific terms and conditions set by your employer as well as tax authorities.
So, if LTA is a part of your salary, then do not forget to consider it the next time you plan a vacation while on leave.
Also, you can utilise other deductions under Section 80C, Section 80D and other applicable provisions of the Income Tax Act to reduce your tax liability further.
