LTA full form is Leave Travel Allowance and it is a form of stipend given by an employer to an employee who is on leave from work to fund his or her travel expenses. LTA is an integral part of an employee’s compensation and it is deductible from payroll tax under the Income Tax Act of 1961.
What is Leave Travel Allowance?
Leave Travel Allowance is a tax-free allowance employers offer employees as part of their salary component. Under this allowance, the costs incurred by the employee on taking a trip for leisure purposes are allowed as a tax-free expense. Employees can, therefore, take a leave from work and travel on vacation, and the costs incurred would be allowed as a tax-free allowance by the employer. The exemption is allowed twice in a block of four years. Employees must submit the bills and travel documents to their employer to avail of the LTA tax benefit. The exemption is allowed only for the expenses incurred during the travel period and is subject to certain conditions.
Who can claim LTA this year?
- The vacation should be taken only within India.
- Costs incurred for family members who travel with the employee would also be allowed as an exemption. The family members for this purpose would include spouses, children, dependent parents, and dependent siblings.
- LTA components must be included in the employee’s salary structure.
- The exemption can be claimed for up to two children born on or after 1 October 1998. There would be no restriction for children born before this date. The exemption can be claimed for all dependent children traveling with the employee born before 1 October 1998. Further, multiple births on a second occasion after having one child are also not affected by this restriction.
- LTC exemption would be allowed for up to two journeys taken within a block of four calendar years. Block year refers to a specific period of four years, during which an employee is allowed to claim LTA for up to two trips. The current block year for claiming LTA started in 2022 and will end in 2025. If an employee does not claim LTA during the current block year, they are allowed to carry over such exemption to the next block provided they avail of this benefit in the first calendar year of the immediately succeeding block. After that, the unused LTA entitlement for the current block year is forfeited, and the employee will need to wait for the next block year to claim LTA again.
- LTA can be claimed for travel by any mode of transport, including air, train, or road.
- No LTA is allowed for hotel accommodation and food.
Expenses exempted under LTA Allowance
- Travel by plane: The cheapest airfare using the shortest route or the amount paid, whichever is less, would be omitted.
- Travel by rail: A.C. first-class fare from the shortest path or the amount expended on travel, whichever is less, would be removed.
- The origin and destination points of the journey are linked by train, but the journey is completed by another means of transportation.
- The origin and destination locations are not linked by rail (partly or completely) but are connected by another recognized public transportation system.
- The origin and destination locations are not linked by rail (partly or completely) but are connected by another recognized public transportation system.
What is the eligibility of LTA exemption?
The quantum of LTA exemption, which can be claimed as a tax-free expense, depends on the actual cost incurred on travel. The expense incurred on booking a journey from the employee’s place of origin to the place of travel and back is allowed as an LTA exemption. The journey should, however, be undertaken using the shortest possible route, which is air, rail, or bus. Only the cost of tickets booked for travel would be allowed as an exemption. Costs incurred on conveyance, sightseeing, accommodation, shopping, food, etc., would not be allowed. If the LTA allowance offered by the employer is lower than the actual cost incurred on traveling, the exemption would be limited to the LTA allowed by the employer and not the actual costs incurred.
For instance, if the employer allows an LTA of INR 25,000 and the employee incurs travel costs of INR 35,000 on booking travel tickets, LTA exemption can be claimed only for INR 25,000.
On the other hand, if the employee incurs a cost of INR 20,000, the exemption allowed would be INR 20,000 since it is lower than the actual LTC the employer allows.
LTA Restrictions
- The Leave Travel Allowance only applies to travel expenditures.
- The individual can only travel with India.
- Proof of travel must be kept by the individual as it may be required for tax auditing purposes.
- More than two children born after October 1, 1998, are not eligible for the Leave Travel Allowance exemption.
- LTA can only be claimed twice in a four-year period.
- If LTA is not claimed in a specific block, it may be carried over to the next block and used in the first year of the next block.
- The LTA exemption also covers the individual’s family. Under LTA, a family includes immediate family members such as parents, siblings, spouse, and children.
How to claim LTA — a step by step process?
- Check your eligibility: Ensure you are eligible for LTA and have completed the required years of service with your employer. Check the LTA rules and regulations specific to your employer.
- Plan your travel: Plan your travel in advance and select the mode of transport that you wish to use. Keep all the relevant documents related to your travel, such as tickets, boarding passes, and invoices.
- Apply for LTA: Fill out the LTA application form provided by your employer. Provide all the relevant details of your travel, such as the date of travel, destination, mode of transport, and cost incurred.
- Submit proof of travel: Along with your application form, submit all the relevant documents, such as tickets, boarding passes, and invoices, that prove your travel. These documents serve as proof of your LTA claim.
- Await approval and reimbursement: Your employer will verify your LTA claim and, once approved, reimburse the amount claimed as per their policy. The reimbursement may be processed as part of your regular salary or as a separate payment.
FAQs
Claiming LTA in case of a job change?
Even if the employee changes his/her job, an LTA exemption is available. If the change happens within four years and there is any unutilized LTA, it can be claimed by the new employer. However, if the LTA has been availed from the old employer, no new LTC will be allowed by the new employer.
Unclaimed LTA?
LTA exemption is available for two journeys undertaken in a block of four years. However, if the employer does not take two journeys within the four-year block, only one unutilized LTA can be carried forward to the next block of years and claimed therein. However, to claim the unutilized LTA, the employee would have to take a trip in the first calendar year of the next block. If the unutilized LTA is not claimed within the first year of the next block, it will expire and will not be allowed to be claimed later on.
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