Leave Travel Allowance (LTA)

What is a leave travel allowance or LTA?

LTA or leave travel allowance is a component of the salary that covers travel expenses while an employee is on leave. The employer provides it only for country-wide travel for the employee and family members.

Section 10(5) of the Income Tax Act of India with Rule 2B states that the LTA and other related conditions are exempted from tax. However, it is not available for employees who choose the New Tax Regime.

Example: Consider Rohan, who receives a Leave Travel Allowance (LTA) of ₹20,000 from his employer. However, his actual travel expenses amount to only ₹15,000. In this case, Rohan’s exemption is limited to the actual amount he spent on travel, which is ₹15,000. This exemption applies to expenses directly related to travel, such as transportation costs, and does not cover other expenses like meals or accommodation.

Who is eligible to claim leave travel allowance?

Any salaried individual who has incurred travel expenses while on a planned leave is eligible to claim a leave travel allowance. It can be availed for a minimum of a 3-day leave period while traveling within the country. The reimbursement requires approval of leave from your supervisor beforehand.

The LTA exemption covers the shortest distance between two places. For air travel, the exemption is capped at the economy fare of Air India for the shortest route to the destination and doesn’t apply for foreign travel. It’s applicable for the employee and their family, limited to two children.

What is the latest block period to claim LTA exemption?

The latest block period to claim LTA exemption is 2022 to 2025 which is the 10th block year. The tax exemption can be claimed twice within four years.

Is leave travel allowance taxable?

No, the leave travel allowance is not taxable up to a limit of INR 36,000 (round trip) under the Income Tax Act, of 1961. LTA is an excellent way to save taxes for employees as long as it meets the conditions mentioned in the Act.

Note that, for employees who have chosen the New Tax Regime, leave travel allowance is taxable as per section 115 BAC of the Act (NPTR).

How can employees claim LTA benefits?

To claim benefits, employees must first check with the employer if the LTA component is available in the CTC or the salary slip. The following are the rules for claiming LTA benefits:

1. Tax benefits can be claimed after filling out the required application forms and providing supporting travel documents as requested by your employer.
2. Employees can claim LTA after completing the return journey of the planned trip.
3. Employees must provide documents for proof of travel like travel tickets, GST receipts, etc.
4. Employees can submit LTC claims for some family members with proof of travel and for the rest based on certification within the same block if desired.
5. If an employee does not undertake any travel, the LTA amount gets included in your salary and becomes taxable according to your income tax slab.

What is the maximum LTA limit?

The maximum LTA limit is granted by the employer.

​​Suppose your employer provides LTA amounting to ₹30,000, and your actual travel expenses sum up to ₹25,000. In this case, you’re eligible to claim exemption only for the ₹25,000 you spent on travel, not for the entire LTA grant of ₹30,000.

Which section of the Income Tax Act allows an exemption for LTA?

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

Frequently Asked Questions

1. Can LTA exemption be claimed on every vacation?

No, LTA exemption cannot be claimed on every vacation. It can be claimed only for domestic travel for two trips in a block period of four years.

2. How is the leave travel allowance calculated?

If the employer grants an LTA of ₹40,000, and the employee’s actual travel expenses amount to ₹25,000, only ₹25,000 will be available as an exemption. The remaining ₹15,000 will be included in taxable salary income.

3. Are there any recent updates or amendments to LTA rules?

The only recent update or amendment to LTA rules is that tax exemption cannot be claimed under the New Tax Regime.

4. Can LTA be claimed for travel expenses incurred by family members?

Yes, LTA can be claimed for travel expenses incurred by immediate family members such as spouses, dependent parents, or siblings and up to two children.

5. What happens if an employee does not utilize the full LTA amount in a year?

If an employee does not utilize the full LTA amount in a year, one journey qualified for LTA can be carried forward to the next 4-year block. To claim the unused LTA, the employee must undertake a trip within the first calendar year of the subsequent block.