Leave Travel Allowance (LTA or LTC) – Exemption & Calculation
What is Leave Travel Allowance (LTA)?
Leave Travel Allowance (LTA) is a allowance type which is given to an employee from his employer to cover his travel expenses when he is on leave from work. LTA is exempted from tax u/s 10(5) of Income Tax Act, 1961.
LTA or LTC can be broadly categorized as below in 2 parts:
1) Any travel assistance received by employee from his employer for himself and his dependent family to cover expenses incurred in travelling while on leave.
2) Any travel assistance received by employee from his former employer for himself or his dependent family to cover expenses incurred in travelling after retirement or termination of his service.
Dependent Family Members includes:
- a) Spouse of individual
b) Children of individual
c) Parents of individual (mainly or wholly dependent on the individual)
d) Brothers and sisters of individual (mainly or wholly dependent on the individual)
- People incur several kinds of expenses during their holiday trip but not all of them are covered by LTA. Expenses made on food, shopping, etc. are not tax deductible.
- Only the expenses made by employee on travelling are born by the employer for which he provides LTA to the employee.
- The individual must preserve the proof of travel as the same may be required at the time of tax auditing.
- Exemption is allowed for only twice within a block of 4 years.
- Amount of exemption is decided as per the mode of transportation opted for and the connectivity of the place of travel
What are Leave Travel Allowance (LTA) block years?
LTA block is a period of 4 years suggested by IT Department during which exemptions can be claimed 2 times during every block period.
Here is the list of the block years suggested by IT department so far:
Current LTA Block Year
The current on-going block year is the 8th block year. The 4 years in this block are the years 2014, 2015, 2016 and 2017.
List of Expenses Exempt under LTA
1) In case of travel by Air
economy air fare of national carrier by the shortest route or the actual amount spent on travel whichever is less is exempt from tax.
2) In case of travel by Rail
A.C. first class rail fare by shortest route or actual amount spent on travel whichever is less is exempt from tax.
3) If the origin and destination spots of journey are connected by rail but journey is performed by other mode of transport and not air or rail
A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
4) If the origin & destination points are not connected by rail or air (partly/fully) but connected by other recognized Public transport system
first class or deluxe class fare of such transport by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
5) If the place of origin & destination are not connected by rail or air (partly/fully) and also not connected by other recognized Public transport system
AC first class rail fare by shortest route (if the journey was performed by rail) or the amount spent on travel, whichever is less is exempt from tax.
If the assesse did not use LTA provided by his employer either once or twice (the permitted limit) in a 4 years block period he can still claim LTA exemption by using LTA in the year immediately succeeding the earlier 4 years block.
Let’s understand this with the help of an example:
Suppose Mr. Ramesh claimed only one exemption during the 7th block which lasted from 2010-13. He still has one exemption remaining. So when can he claim it?
Mr. Ramesh can claim this concession in the next year, i.e. 2014 which is part of the current block. So, in the current block period (i.e. 2014-17), he can avail LTA claims 3 times in total but he needs to claim the carry over LTA of previous block in 2014 only and not later than that.
Limitations or Restrictions Applicable under LTC
- LTC covers only domestic travel, i.e. only within India. International travel is not covered under this.
- To claim LTA, the mode of travel should be either air, railway or public transport.
- LTA is provided for only travel expenses.
- Tax exemption on LTA cannot be claimed for more than 2 children on an individual. This restriction is not applicable if children are born before October 1st 1998.
- Children born out of multiple birth after the first child will be treated as one child only. So the above mentioned restriction will not be applicable in this case also.
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