LTA is a financial benefit for all employees. It helps cover domestic travel expenses for two trips in four financial years. The LTA amount is tax-free. It is one of the best tax-saving tools available to an employee. It is a tax exemption employers offer to their employees.
What is the Full Form of LTA?
The full form of LTA is Leave Travel Allowance. LTA is an allowance employers offer their employees for domestic travel. This allowance allows employees to take a vacation where travel costs are tax-free. Leave Travel Allowance is available for any two years within a four-year block. Employees must submit the bills and travel documents to their employer to take advantage of the LTA tax benefit.
Who can Claim Leave Travel Allowance (LTA)
Only employees and their spouses, children, dependent siblings, and parents can claim LTA. This exemption does not apply to more than two of an employee’s children if they are born after October 1, 1998.
Rules for Claiming Leave Travel Allowance (LTA)
The rules for claiming LTA are as follows:
- LTA does not cover international travel. Employees can only use domestic trips to make the claim.
- The employee’s family members are also allowed to use LTA to cover the cost of their travel. The family members for this purpose include spouses, up to two children (if born after 1 October 1998), dependent parents, and siblings.
- The employee’s salary structure must mention the Leave Travel Allowance.
- Only the cost of travel is taken into consideration for tax exemption. No other expenses like hotel accommodation, food, or shopping qualify for this exemption.
- An employee can claim LTA two times in a block of four years.
- LTA can be claimed for travel by any mode of transport, like air, train, or road.
- If Leave Travel Allowance isn’t claimed in a particular block of four years, it can be carried over to the next block.
Eligibility for Leave Travel Allowance (LTA)
Only the cost of travel of an employee is eligible for claiming LTA. Expenses such as local sightseeing, hotel accommodation, food, shopping, etc., do not qualify for this exemption. If the LTA provided by the employer is less than the actual cost of travelling, the exemption will be limited to the LTA amount specified by the employer rather than the actual cost.
If the employer offers a Leave Travel Allowance of Rs. 25,000 and the employee’s travel costs Rs. 35,000, a Leave Travel Allowance exemption can only be claimed for Rs. 25,000.
Documents Required for Claiming Leave Travel Allowance (LTA)
Documents like the LTA form and proof of travel, such as tickets and boarding passes, are required to claim Leave Travel Allowance.
Procedure to Claim Leave Travel Allowance (LTA)
Every employer announces the due date before which employees can claim LTA and may ask employees to submit proof of travel, such as tickets, boarding passes, invoices provided by travel agents, etc., along with the mandatory declaration. Though employers don’t need to collect proof of travel, it is always prudent for employees to keep copies for their records and submit them to the employer based on the company’s LTA policy or to the tax authorities on demand.
Leave Travel Allowance (LTA) Exemption for Various Modes of Transportation
- Travel by air: If an employee travels by air, the exemption would be the economy class airfare by the shortest route to the travel destination.
- Travel by train: If an employee travels by train, the exemption would be the fare of an AC first-class train ticket for the shortest route.
- Travel by other modes of transportation: If the destination is not connected by air or train, the exemption would be the fare of an AC first-class train ticket for the distance of the journey for the shortest route, whether connected by train or not.
Leave Travel Allowance (LTA) for Multi-Destination Trips
If an employee goes on vacation and visits multiple cities, in that case, the exemption will cover the cost of round-trip travel from their home city to the farthest city they visit and back. In other words, the Leave Travel Allowance will cover the most expensive leg of their journey.
Suppose the employee resides in Delhi and travels to Mumbai, Goa, and Chennai for vacation.In that case, round-trip travel from Delhi to Mumbai is Rs. 4,000, from Delhi to Goa is Rs. 5,000, and from Delhi to Chennai is Rs. 7,000.In this scenario, the LTA exemption would be Rs. 7,000, which is the cost of the round-trip travel from Delhi to Chennai and back. Even though the employee visited multiple cities, the Leave Travel Allowance will cover the expense of the farthest city visited and the return journey, which in this case is Chennai.
Claiming Leave Travel Allowance in case of a Job Change
A Leave Travel Allowance exemption would be available even if an employee changes their job. If the change happens within the block and there is any unutilized LTA, it can be claimed with the new employer. However, if the employee has already availed of the Leave Travel Allowance, it would not be allowed by their new employer.
Unclaimed Leave Travel Allowance
LTA exemption is available for two trips in a block of four years. However, if the employee does not take two trips within the four-year block, only one unutilized Leave Travel Allowance is carried forward to the next block of years. However, to claim the unutilized Leave Travel Allowance, the employee must take a trip in the first calendar year of the next block; otherwise, it will expire.
Leave Travel Allowance (LTA) Exemption for Vacation on Holiday
Under the Income Tax Act 1961, the LTA exemption is only allowed when an employee applies for a leave from work and then travels on vacation. Employees who take their vacation on official holidays or weekends cannot claim Leave Travel Allowance.
Conclusion
It is crucial for employees to meticulously document their travels, be aware of submission deadlines, and stay up to date with any changes in regulations. Understanding Leave Travel Allowance provides potential tax savings and the opportunity to explore new destinations. As you embark on your next adventure, confidently navigate the roads, armed with the understanding of how to make the most of your Leave Travel Allowance. Safe travels!
FAQs about Leave Travel Allowance
How many times can an employee claim Leave Travel Allowance?
An employee can claim LTA only twice in a block of four years.
Is international travel covered under Leave Travel Allowance?
No, international travel is not covered under Leave Travel Allowance.
Which section of the Income Tax Act allows an exemption for LTA?
Section 10 (5) of the Income Tax Act, 1961 allows LTA exemption.
If an employee’s parents-in-law travel with him, would the travel costs for the parents-in-law be claimed as an exemption?
No, LTA exemption cannot be claimed for travel costs for the parents-in-law of an employee.
Can only the travel costs of the family members be claimed as LTA if the employee does not travel?
No LTA exemption would be allowed if the employee does not travel, even if their family members travel.
What would happen if the employee did not travel in a block of four years?
LTA exemption is prohibited if the employee does not travel in a block for four years. However, one unutilized LTA can be carried forward to the next block.
Can I claim an LTA exemption twice in one financial year?
No, only one LTA exemption can be claimed in one financial year.
What is the latest block period to claim LTA exemption?
The latest block period to claim LTA exemption is from January 1 2022, until December 31 2025.
