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Leave Travel Allowance (LTA) – Rules, Claims, Exemption and Eligibility

Leave Travel Allowance

Leave Travel Allowance (LTA) is a financial benefit for all employees. It helps cover domestic travel expenses for two trips in a block of four financial years. The LTA amount is tax-free. It is one of the best tax-saving tools available to an employee. It is a tax exemption employers offer to their employees.

What is Leave Travel Allowance (LTA)?

Leave Travel Allowance is an allowance employers offer their employees for domestic travel. This allowance allows employees to take a vacation where travel costs are tax-free. LTA is available for any two years within a four-year block. Employees must submit the bills and travel documents to their employer to take advantage of the LTA tax benefit.

People who can Claim Leave Travel Allowance (LTA)

Only employees and their spouses, children, dependent siblings and parents can claim LTA. This exemption does not apply to more than two of an employee’s children if they are born after October 1 1998.

Rules for Claiming LTA

The rules for claiming LTA are as follows:

  • LTA does not cover international travel. Employees can only use domestic trips to make the claim.
  • The employee’s family members are also allowed to use LTA to cover the cost of their travel. The family members for this purpose include spouses, up to two children(if born after October 1 1998), dependent parents and siblings.
  • The employee’s salary structure must mention the LTA.
  • Only the cost of travel is taken into consideration for tax exemption. No other expenses like hotel accommodation, food, or shopping qualify for this exemption.
  • An employee can claim LTA two times in a block of four years.
  • LTA can be claimed for travel by any mode of transport, like air, train, or road.
  • If LTA isn’t claimed in a particular block of four years, it can be carried over to the next block.

Eligibility for Leave Travel Allowance (LTA)

Only the cost of travel of an employee is eligible for claiming LTA. Expenses such as local sightseeing, hotel accommodation, food, shopping, etc., are not eligible for this exemption. If the LTA provided by the employer is less than the actual cost of travelling, the exemption will be limited to the LTA amount specified by the employer rather than the actual cost.

For example, if the employer offers an LTA of Rs. 25,000 and the employee’s travel costs Rs. 35,000, an LTA exemption can only be claimed for Rs. 25,000.

LTA Exemption for Various Modes of Transportation

  • Travel by air: If an employee travels by air, the exemption would be the economy class airfare by the shortest route to the travel destination.
  • Travel by train:  If an employee travels by train, the exemption would be the fare of an AC first-class train ticket for the shortest route.
  • Travel by other modes of transportation: If the destination is not connected by air or train, the exemption would be the fare of an AC first-class train ticket for the distance of the journey for the shortest route, whether connected by train or not.

LTA for Multi-Destination Trips

If an employee goes on vacation and visits multiple cities, in that case, the exemption will cover the cost of round-trip travel from their home city to the farthest city they visit and back. In other words, the LTA will cover the most expensive leg of their journey.

For example, suppose the employee resides in Delhi and travels to Mumbai, Goa, and Chennai for vacation. In that case, round-trip travel from Delhi to Mumbai is Rs. 4,000, from Delhi to Goa is Rs. 5,000, and from Delhi to Chennai is Rs. 7,000. In this scenario, the LTA exemption would be Rs. 7,000, which is the cost of the round-trip travel from Delhi to Chennai and back. Even though the employee visited multiple cities, the LTA will cover the expense of the farthest city visited and the return journey, which in this case is Chennai.

Claiming LTA in case of a Job Change

An LTA exemption would be available even if an employee changes their job. If the change happens within the block and there is any unutilized LTA, it can be claimed with the new employer. However, if the employee has already availed of the LTA, it would not be allowed by their new employer.

Unclaimed LTA

LTA exemption is available for two trips in a block of four years. However, if the employee does not take two trips within the four-year block, only one unutilized LTA is carried forward to the next block of years. However, to claim the unutilized LTA, the employee must take a trip in the first calendar year of the next block; otherwise, it will expire.

LTA Exemption for Vacation on Holiday

Under the Income Tax Act 1961, the LTA exemption is only allowed when an employee applies for a leave from work and then travels on vacation. Employees who take their vacation on official holidays or weekends cannot claim LTA.

Documents Required for Claiming LTA

Documents like the LTA form and proof of travel, such as tickets and boarding passes, are required to claim LTA.

Procedure to Claim LTA

Every employer announces the due date before which employees can claim LTA and may ask employees to submit proof of travel, such as tickets, boarding passes, invoices provided by travel agents, etc., along with the mandatory declaration. Though employers don’t need to collect proof of travel, it is always prudent for employees to keep copies for their records and submit them to the employer based on the company’s LTA policy or to the tax authorities on demand.

Conclusion

It is crucial for employees to meticulously document their travels, be aware of submission deadlines, and stay up to date with any changes in regulations. Understanding LTA  provides potential tax savings and the opportunity to explore new destinations. As you embark on your next adventure, confidently navigate the roads, armed with the understanding of how to make the most of your Leave Travel Allowance. Safe travels!

FAQs about Leave Travel Allowance (LTA)

An employee can claim LTA only twice in a block of four years.

No, international travel is not covered under Leave Travel Allowance.

Section 10 (5) of the Income Tax Act, 1961 allows LTA exemption.

No, LTA exemption cannot be claimed for travel costs for the parents-in-law of an employee.

No LTA exemption would be allowed if the employee does not travel, even if their family members travel.

LTA exemption is prohibited if the employee does not travel in a block for four years. However, one unutilized LTA can be carried forward to the next block.

No, only one LTA exemption can be claimed in one financial year.

The latest block period to claim LTA exemption is from January 1 2022, until December 31 2025.

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