Leave Travel Allowance (LTA)
What is LTA?
LTA or Leave Travel Allowance, is a tax exemption for an allowance paid to the employee by the employer for travel expenses, while he or she is traveling on a leave.
Leave travel allowance can act as a tool for employees to save on taxes while taking leaves for traveling across India. Section 10(5) of the Income Tax Act, 1961, along with Rule 2B, provides tax exemptions and outlines the conditions for such exemptions. However, individuals opting for the New tax slab are not eligible for leave travel allowance.
An employee needs to plan their travel according to the purpose of claiming LTA exemption successfully. The income tax department of India has listed some rules and regulations regarding claiming exemptions under LTA.
Eligibility Criteria for Claiming LTA
The eligibility criteria for claiming LTA or leave travel allowance are as follows.
1. Legitimate evidence: Employees have to provide real pieces of evidence of their travel expenses to claim the LTA. It allows all modes of travel including land, train, and air. Only legitimate cost of travel is permitted for reimbursement.
2. Only travel costs: Other costs during traveling such as food, lodging, activities, etc are not covered under LTA.
3. Only domestic travel: Leave travel allowance only covers domestic travel across India. Employees cannot claim LTA for overseas (foreign trips) travel.
4. Twice in 4 years: The Government of India allows employees to claim LTA only twice in a block of 4 years. They cannot apply for LTA every fiscal year.
How to Claim Leave Travel Allowance (LTA)?
The process for claiming leave travel allowance differs according to the company. Employers commonly announce a due date for employees to claim for LTA. It is important to go through the LTA policy of the organization for a detailed claiming process.
In general, it contains these 3 basic steps:
- Filling out the LTA form provided by the employer.
- Submitting proof of travel details (documents).
- Waiting for approval and reimbursement.
Documents Required for Claiming LTA
Employees might have to submit proof of travel records such as
- Boarding passes
- Receipts from travel agencies, etc.
Although in many cases, employers do not ask for the above-mentioned proof of records, it is advisable for employees to retain these documents.
LTA Rules for Exemption
1. Employees can travel to any place in India.
Traveling to any destination across India is allowed under LTA. If the destination is not directly connected by recognized public transport, it will be assumed that the journey is made using the
Indian railway using the shortest route. The exempted travel costs will be based on the fare of AC first-class rail tickets from the origin city to the destination city.
2. No international trips are considered.
In a case where the employee is taking an international or foreign trip, he/she/they is not eligible for an exemption.
3. There should be an actual journey to be eligible for claiming the exemption.
An employee cannot claim an exemption without traveling. The employer may ask for proof of travel records such as tickets, boarding passes, or receipts from the travel agent.
4. Food or stay or any other expenses are not considered.
Only the travel cost is exempted under LTA. Other expenses such as food, lodging, vacation activities, and sightseeing are not covered under LTA.
5. LTA can be claimed only for two journeys in a block of four years.
A block year is predetermined by the Government of India for employees to claim LTA. The first block year began in 1986 and is for a period of 4 years. The latest block year for claiming LTA is 2018-2021. Employees can claim exemption on travel expenses twice in one block of 4 years.
6. The family of the employee can also claim an exemption.
Employees can claim for exemption of travel expenses if any family member such as a spouse, children, dependent parents, brother, or sister takes a journey with or without them.
Unclaimed LTA – Carry Forward
In a case where an employee does not claim the leave travel allowance within the 4 years block, one of the 2 unused LTA is applicable to be carried forward to the next 4-year block. The employee can then use 3 LTAs in that block of 4 years.
To be eligible for the unutilized Leave Travel Allowance (LTA), the employee must undertake a trip during the first calendar year of the subsequent block. If the unclaimed LTA is not utilized within the initial year of the following block, it will expire and cannot be claimed at a later time.
What expenses can be included under LTA?
Leave Travel Allowance can be claimed only on the travel expenses incurred by an employee during a trip. It cannot be claimed for other expenses during the trip such as food, lodging, vacation activities, sightseeing, local conveyance, etc.
Calculation of Leave Travel Allowance
Calculating leave travel allowance includes evaluating the income from the salaries of employees. The LTA is exempted to a certain limit, beyond that, the rest of the amount is taxable under the general income tax slab.
For example, imagine an employee receiving an LTA of ₹10,000. If the travel expense incurred by him is ₹8,000, he is only allowed to claim an exemption for ₹8,000. The balance amount of ₹2,000 will be included in his taxable salary income.
5 Benefits of Leave Travel Allowance
1. Tax Saving: LTA allows employees in India to save on income tax by claiming exemption on travel fares or benefits for journeys taken within the country.
2. Family Coverage: LTA extends to the travel expenses of immediate family members, including spouses, siblings, parents, and children, provided they travel together with the employee.
3. Customization by Employers: Employers have the flexibility to determine the LTA amount. It is based on factors like pay scale, job responsibilities, and job title, allowing for customization in an employee’s salary structure.
4. Employee Motivation: Including LTA as part of the salary package can serve as an additional incentive for employees, boosting their overall job satisfaction and motivation.
5 . Domestic Tourism Promotion: LTA encourages employees to explore various destinations within India. This promotes domestic tourism and contributes to the growth of the country’s tourism industry.
Frequently Asked Questions (FAQs)
Q. Who is eligible for LTA?
Any salaried employee in India working under a registered company is eligible for LTA. The LTA can be claimed only on travel costs incurred by the employee. The travel expense claimed under LTA is only allowed on domestic travel. The LTA can only be requested if the employee has taken time off from work specifically for traveling.
Q. Can I claim LTA without traveling?
No, Leave Travel Allowance cannot be claimed without traveling. LTA is a benefit provided to employees to cover their travel expenses when they take leave for the purpose of travel. To claim LTA, you must have undertaken the travel and provide relevant proof such as tickets or travel receipts.
Q. What happens if LTA is not claimed?
Under the carry-over concession rules, if an employee has not claimed LTA in the previous block or has claimed it only once, they can still claim an additional LTA in the next block of calendar years. This allows the employee to avail of LTA tax breaks for up to three journeys in the current block of years.
Q. How many leaves are required to claim LTA?
The minimum number of leaves required to avail of the Leave Travel Allowance (LTA) exemption is not specified in the Income-tax Act. However, it is advisable to inquire with your employer as they may have their own requirement regarding the number of leaves needed to claim the exemption.
Q. Can I claim LTA in ITR?
Yes, you can claim LTA in your ITR. LTA is a tax benefit for travel expenses within India provided by employers. Keep necessary documentation and receipts for support. Ensure you meet the specific conditions and limitations set by your employer. Consult a tax professional or refer to the latest guidelines for accurate filing.
Q. Is Leave Travel Allowance only for Domestic Travel?
Yes, Leave Travel Allowance can be exempted only for domestic travel across India. It does not allow tax exemptions for foreign trips or overseas travel. It can be claimed for travel to any destination within India by means of road, rail, or air. The purpose of LTA is to encourage employees to take vacations and explore different parts of the country.
Q. How much is LTA in salary?
LTA deductions are applicable only for the shortest tour journey, including the place of departure and return. For instance, if a salaried employee receives ₹50,000, they can claim only ₹30,000. The remaining ₹20,000 will be treated as taxable income based on the applicable tax slab rates.
Q. What is the maximum limit in LTA?
The maximum limit for LTA (Leave Travel Allowance) is determined by the employer and may vary. However, there is a caveat that the exemption is limited to the lowest of the following three amounts:
- The actual travel expenses incurred by the employee for the trip.
- The amount specified by the employer in the LTA policy.
- The amount is equivalent to the economy-class airfare of the national carrier (in case of air travel) or the first-class AC train fare (in case of rail travel) for the shortest route to the destination.