If you are a salaried individual you might have heard of Leave Travel Allowance or LTA. This is sometimes also referred as Leave Travel Concession or LTC. LTA or LTC is a very important component of your salary and you can save some of your taxes, if you avail the benefit in a correct manner.
What is LTA Leave Travel Allowance ?
As the name suggests, Leave Travel Allowance or LTA refers to an allowance provided to an employee when he travels or goes for a vacation while on leave.
Employers normally offer Leave Travel Allowance or LTA to their employees based on their position in the Company.The employer reimburses you against your travel and you claim a tax benefit on the same.
LTA is considered as another Tax saving option for salaried individuals.
Hence,the employees can claim Tax exemption Under Section 10(5) of The Income Tax Act for the amount of LTA received from the employer.
But,wait…that does not mean that you can claim the entire amount as Tax exemption.There are certain LTA Rules to be kept in mind while availing the LTA Tax Exemption.
You will get an answer to all your queries related to Leave Travel Allowance or LTA, LTA Rules and the Tax exemption on it.
First of all,let us make it clear that amount received as Leave Travel Allowance or LTA shall be taxed as :
|LTA/LTC Received from employer||XXX|
|Less : LTA/LTC Exempt from tax ( check rules )||XXX|
This taxable amount shall be charged to tax as per the Income Tax Slabs for the financial year.
Leave Travel Allowance or LTA Rules and LTA Exemption :
We have highlighted the important LTA Rules and points to be considered while claiming your LTA Exemption.
1. LTA exemption is allowed for Travel to places within India only.So,LTA exemption is provided in case of domestic travel only. Hence,a foreign trip is not covered here.
2. LTA exemption is allowed for the family of the employee as well. Family here includes the following members :
- Maximum of two children who are born after October 1, 1998. This restriction is not for children born before this date.
- Parents and siblings who are wholly or mainly dependant on the Individual.
3. This tax exemption for LTA is restricted to travel cost only. This includes only the travel fare for the journey. So, you cannot claim this exemption for any other expenses like food expenses,lodging expenses or shopping expenses etc.
You can claim the following amount as LTA exemption based on your mode of travel and amount spent :
|Mode of Travel||Exemption allowed|
|Travel by Air||Economy class air fare or actual amount spent whichever is less|
|Travel by Rail||A.C.First class rail fare or actual amount spent whichever is less|
|Travel by Other modes of transport ( Not by air or rail )||Where recognised mode of transport exists : Exemption allowed to maximum of 1st class/Deluxe class fare|
|Where recognised mode of transport does not exist : Exemption upto A.C.First class rail fare for distance covered by the shortest route|
Example 1 : Mr.Sam works in New Delhi. He gets an LTA of Rs.20000.He goes for a vacation from New Delhi to Goa.He took business class air tickets,the cost of which is Rs.30000, the hotel stay bills amount to Rs.10000 and food and refreshments cost him Rs.6000.The actual economy air fare (to and fro) is Rs.20000 only.
Now,Mr.Sam is eligible for an LTA exemption of maximum of Rs.20000 only. Further,he cannot claim any tax benefit for hotel bills,food bills etc.
Example 2 : Here,if Mr.Sam gets LTA of Rs.20000. But,he spends only Rs.15000 on his travel fare,then the LTA exemption shall also be restricted to Rs.15000 only.
4. This LTA Exemption is allowed for any 2 journeys within a block of 4 calendar years.The current LTA block is 2014-2017. You have to consider calendar year from 1st January,2014 to 31st December,2017.Also, you can avail only one LTA benefit once a year.
If you cannot claim this exemption in a particular year, you can carry only one LTA forward to the next block. But,this must be claimed in the first calendar year of next block.
So,if you have not claimed LTA Exemption in the LTA Block of 2014-2017. Then you can carry forward the same but you will have to avail the same before 31st December,2018.
5. You should maintain proper proof of your travel in the form of tickets,boarding passes,bills etc. so as to justify the same as and when need arises. Don’t make false claims just to avail the tax benefit.
6. In a latest amendment, an employee has to submit Form 12BB to claim Tax exemptions like Leave Travel Allowance or LTA, House Rent Allowance or HRA and interest on home loans etc. Checkout the same to keep yourself updated. So,you need to provide complete details and cannot anyways escape that anyways.
7. This exemption can be availed for the journey performed by an Individual while on leave. You should not be working in the office on the days for which you have shown such travel.
8. Fare shall be allowed for the shortest route from place of origin to the place of destination. Any unnecessary halt or going through a long route when a shorter route is available shall not be considered.
If you travel through business class from New Delhi to Bangalore via Mumbai, you shall be entitled for LTA exemption for economy travel from New Delhi to Bangalore directly (shortest route).
9. The tax benefit on LTA/LTC can be claimed by employee when he actually goes for vacation alone or with his family. So,the employee can avail this benefit whether he is travelling alone or his family accompanies him.
One important thing to remember here is, that employee should accompany his family and not vice versa. This means,if employee travels alone,he is eligible for LTA exemption. But,if family travels without the employee, then such employee cannot claim tax benefit for his family’s travel.
10. If you and your spouse both are working and receive LTA from your respective employers, you both are entitled to claim LTA exemption but for different journeys. Both of you cannot claim LTA for same journey.
However, this can happen if you both divide the expenses of the journey.e.g. If you claim for travel fare to the holiday spot and your wife claims for the return journey. This way you both will be claiming but not for the same expense.
11. This is applicable only for salaried persons. A businessman or professional cannot pay LTA or LTC to himself, and hence is not eligible for such exemption.
12. Sometimes,your employer might reimburse you the total travel amount including boarding and lodging as per LTA reimbursement policy of the Company. But,that does not make you eligible to claim the entire amount as tax free. For income tax purposes, you have to check the LTA rules as stated above.
13. If you get the LTA encashed without performing any travel, you are not eligible to claim the LTA exemption. In simple words, if you don’t travel and encash your LTA amount, you cannot claim any tax benefit for the same.
In this case the entire LTA received from the employer shall become part of your income and shall be fully taxable.
14. A final note : This is a useful tool to save a little part of your taxes in a legal way. So, if your salary structure consists of LTA and you get reimbursed for the same by your employer, don’t forget to avail the tax benefits as applicable.
So,the next time you plan your vacation or if you have already gone for one during the year, do remember to avail the Leave Travel Allowance exemption or LTA tax exemption.
Feel free to share your valuable feedback or any queries thereupon in the comment section below !
Have a happy journey and wise tax planning !
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