Leave Travel Allowance (LTA)

Leave Travel Allowance (LTA) is a tax-saving benefit provided by employers to employees for travel within India. It allows employees to claim exemptions on travel expenses incurred during their leave period. Understanding LTA can help you optimize your tax savings and plan your vacations effectively.

What is Leave Travel Allowance (LTA)?

LTA is an allowance provided by employers to employees for covering travel expenses during their leave. Under Section 10(5) of the Income Tax Act, 1961, LTA is exempt from tax, subject to certain conditions. The exemption applies only to travel expenses incurred within India and does not cover international travel.

Eligibility Criteria for LTA

• Employee Status: You must be a salaried employee with LTA included in your salary package.
• Travel Within India: The travel must be undertaken within India. International travel is not eligible for LTA exemption.
• Family Members: LTA can be claimed for travel expenses of the employee and their family, which includes:
  • Spouse
  • Children (maximum of two children born after October 1, 1998)
  • Dependent parents
  • Dependent siblings
• Actual Travel: The exemption is available only if the employee has actually traveled. If no travel is undertaken, the LTA amount received becomes fully taxable.

LTA Block Year System

The Income Tax Department has defined block years for LTA exemption. Each block consists of four calendar years.

• Current Block: 2022–2025
• Previous Block: 2018–2021

Within a block, you can claim LTA exemption for two journeys. If you miss claiming LTA in a block, you can carry forward one unclaimed LTA to the first year of the next block. However, if not claimed in the first year, it lapses.

Exemption Limits and Rules

LTA exemption is limited to the actual travel expenses incurred, subject to the following conditions:

• Air Travel: Exemption is limited to the economy class fare of the national carrier (Air India) by the shortest route to the destination.
• Rail Travel: Exemption is limited to the air-conditioned first-class rail fare by the shortest route to the destination.
• Other Modes: If the origin and destination are not connected by rail:
  • Where recognized public transport exists: Exemption is limited to the first-class or deluxe class fare on such transport by the shortest route.
  • Where no recognized public transport exists: Exemption is limited to the air-conditioned first-class rail fare for the equivalent distance.

Expenses like accommodation, food, local conveyance, and sightseeing are not covered under LTA exemption.

How to Claim LTA

1. Plan Your Travel: Ensure your travel is within India and includes eligible family members.
2. Retain Proof: Collect all travel-related documents such as tickets, boarding passes, and invoices.
3. Submit to Employer: Provide the necessary documents to your employer as per their LTA claim process.
4. Employer Verification: The employer will verify the documents and process the exemption accordingly.
5. Tax Filing: Ensure the exempted LTA amount is reflected correctly in your Form 16 and income tax return.

LTA in the New Tax Regime

Under the new tax regime introduced in the Union Budget 2020, most exemptions and deductions, including LTA, are not available. If you opt for the new tax regime, you cannot claim LTA exemption. Therefore, evaluate both tax regimes to determine which one offers better tax savings based on your income and eligible deductions.

Key Takeaways

• LTA is a tax-exempt allowance for travel within India, provided by employers to employees.
• Exemption is available for actual travel expenses incurred for self and eligible family members.
• LTA can be claimed for two journeys in a block of four years.
• Expenses like accommodation and food are not covered under LTA exemption.
• LTA exemption is not available under the new tax regime.

Understanding the rules and conditions for claiming LTA can help you maximize your tax savings and enjoy your vacations without financial stress.