In the corporate structure, employees are provided various benefits and payments that help them cover many expenses and stay active so that they are not burned out, which will affect their performance and productivity levels. LTA is one such payment made by employers to employees, and the tax implications of the same have been discussed in this article.
What is Leave Travel Allowance (LTA)?
This is an allowance or assistance provided by an employer to the employee for travelling on leave. Despite having a simple name, to avail of any exemption connected with such payment or assistance received from the employer, the employee should make proper travel plans so that he is eligible. The Income Tax Rules provide proper provisions for availing of LTA exemption.
Conditions to be met for Claiming LTA Exemption
The following can be understood as the conditions which should be satisfied by the taxpayer or employee to gain the eligibility to claim the exemption:
- The employee should have travelled or actually conducted a journey
- Only domestic traveling shall be considered for the purpose of providing exemption, this means traveling within India and no international travel shall be allowed.
- The exemption for travel is available for the employee alone or with his family, where ‘family’ includes the employee’s spouse, children, and wholly or mainly dependent parents, brothers, and sisters of the employee. Additionally, such an exemption is not made available for more than a total of two children of a worker or an employee in case a child was born after 1 October 1998. In the case of Children born before 1 October 1998, no restriction shall be applicable. Further, in cases of multiple births on a second occasion after having one child, it shall also not be affected by this restriction.
LTA Exemption, which is Eligible
– The LTA exemption shall be available only on actual travel costs like the airfare, rail fare, or bus fare.
However, expenses like loyal conveyance, hotel accommodation, food, etc., shall not be included in such exemption.
– And it shall also be limited to the amount actually received from the employer as LTA.
Say, the traveling cost of the employee was INR 50,000 but the LTA received from the employer was INR 35,000. So, the LTA exemption was limited to INR 35,000 which is the amount received from the employer.
Exemption Provided for Different Modes of Transportation
| SL. NO | IN CASE | ELIGIBLE EXEMPTION |
| 1 | The place of travel and destination are not connected by any recognized public transport system. | The amount is equivalent to the fare of the air-conditioned first-class rail or trains for the distance of the travelling by the shortest or straightest route as if the journey had been performed by rail or the train system. |
| 2 | Place of travel and destination are not connected by rail or train system (partly/fully) but connected by other recognized public transport systems. | The amount shall be limited to the fare of the first-class or deluxe class by the shortest or the straightest route to the place of destination. |
| 3 | Place of travel and destination are connected by means of train or rail | The amount expended for any mode of transport other than by air is limited to air-conditioned first-class rail fares by the shortest or the straightest route to the place or destination to which the person is travelling. |
| 4 | Travels which are conducted by air | The amount is limited to the economy fare on air and of the national carrier (say, Indian Airlines or Air India) by the shortest or straightest possible route to the place ordestination. |
Claiming LTA Exemption w.r.t Every Vacation
LTA exemption shall be made available to the employee for only two journeys performed in a block of 4 calendar years.
Block Year
A block year is not the same as a financial year and is decided by the Government for the purpose of availing LTA exemptions. It is 4 years each, and the first 4-year block commenced in 1986. So, the block years are:
- 1986-1989
- 1990-1993
- 1994-1997 and so on.
The block currently being worked on is the 2018-21 block, which will be succeeded by 2022-2025.
Carryover of Unclaimed LTA
In case an employee has not availed of LTA exemption with respect to one or two journeys in any of the four-year blocks, he is allowed to carry over such an exception to the block that comes next, provided that he avails of this benefit in the first relevant year or the calendar year that belongs to the immediately succeeding block.
Procedure to Claim LTA
The procedure for claiming LTA is employer-specific. An employer will declare the due date within which an employee can claim LTA and require them to submit proof of travel, such as tickets, boarding passes, and invoices provided by travel agents.
Hence, employees are always advised to collect and keep copies of such travel so that they can be provided on demand to the employer or the tax authorities and easily claimed.
Multi-Destination Journey
Income Tax Act provides exemption with respect to travel costs incurred by an employee on leave in any place in India. Along with conditions pertaining to the mode of transport, it also refers to the place of origin and the place of destination, with the specification that the route must be the shortest available route. So, an employee who is travelling to multiple places in a single vacation can avail of an exemption for the travel cost eligible from the place of origin to the farthest place in the vacation by the shortest and straightest route, which is possible.
