LTA – Leave Travel Allowance – Rules and Exemption
What is Leave Travel Allowance (LTA) ?
Leave Travel Allowance (LTA) is an assistance given by employer to employee for traveling anywhere in India along with his/her family. It is a part of Cost-to-Company (CTC) of employees. Leave Travel Allowance (LTA) is also called as Leave Travel Concession (LTC) and is exempt under section 10(5) of the Income Tax Act, 1961 (subject to conditions).
Conditions for LTA exemption [Section 10(5)]
Exemption under section 10(5) can be claimed only when concession or assistance received by employee is from his employer or former employer and for himself and his family. Further, concession should be related to travel:
- On leave to any place in India;
- To any place in India after the retirement or termination of service.
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Amount of Exemption
The amount of exemption differs on the basis of different situations:
How many journeys are exempt?
Only 2 journeys in a block of 4 calendar years is exempt. The different blocks are:
- 1998 – 2001 (i.e. from 01/01/1998 to 31/12/2001)
- 2002 – 2005 (i.e. from 01/01/2002 to 31/12/2005)
- 2006 – 2009 (i.e. from 01/01/2006 to 31/12/2009)
- 2010 – 2013 (i.e. from 01/01/2010 to 31/12/2013)
- 2014 – 2017 (i.e. from 01/01/2014 to 31/12/2017)
- 2018 – 2021 (i.e. from 01/01/2018 to 31/12/2021)
If the employee has not availed the travel assistance on one or two journeys during any of the four year block period, he can carry forward the exemption to the next block period, provided that exemption should be claimed in the first calender year of the next block (in respect of one journey only). This is known as Carry-over Concession.
For the block period of 2014 – 2017, Mr. Harshad has claimed exemption only once. He can carry over the unclaimed exemption in the next block of 2018 – 2021. But he can claim this carry forward exemption only in 2018 and not afterwards. Further, this exemption will not have any affect on the regular 2 exemption available for 2018 – 2021 block period.
How to avail LTA exemption?
To claim exemption on Leave Travel Allowance (LTA), an employee has to submit documentary evidence of the travel to the employer. In case if employee fails to submit the bills, the LTA amount is treated as the part of the salary and tax is deducted by the employer as per applicable tax slab. However, exemption can be claimed later at the time of filing of return provided documentary evidence of travel is available.
Important points to be noted
- Exemption is based on Actual Expenditure – Exemption under section 10(5) is limited to actual expenditure incurred on the journey. If Leave Travel Allowance (LTA) is taken without performing any journey then, no exemption will be allowed.
- Exemption is available in respect of fare only – The exemption is limited to expenses incurred on air fare and rail fare. No other expenses will qualify for exemption.
- Exemption is available in respect of shortest route – Where the journey is multi destination, the exemption is limited to travel cost admissible for the journey from the place of origin to the farthest point reached by the shortest route.
- The exemption is available for going anywhere in India along with ‘family’.
- Meaning of ‘family’ – Family for the purpose of this exemption included spouse and 2 children. It also includes parents, brothers and sisters of the employee, who are wholly or mainly dependent upon the employee
- The exemption shall be available either if the employee is traveling alone or accompanying his family. But, exemption shall not be available if the family members are traveling separately without the employee who is not on leave (Circlular No. 8/2012 dated October 5, 2012).
- Foreign Travel – As per the provisions of the Rules, exemption is not allowable in case of travel abroad.