File Your Income Tax Return Before 31st July 2024.
Leave Travel Allowance (LTA) is the most common element of compensation adopted by employers to remunerate employees due to the tax benefits attached to it. LTA is the remuneration paid by an employer for employee’s travel in the country, when he is on leave with the family or alone. LTA amount is tax free. LTA is exempt from taxes under the income tax act. In this article, we have tried to explain some interesting and relevant aspects about Leave Travel Allowance which you as a salaried employee must keep in mind.
Meaning of Leave Travel Allowance (LTA)
Leave travel allowance means the allowance provided by the employer to its employee for travelling on leave. It is a component of cost to company which is exempted from taxation under Income Tax Act, 1961, subject to certain terms and conditions.
Advantages of Leave Travel Allowance
- Leave Travel Allowance (LTA) is one of the important components of the salary structure that helps in saving income tax.
- LTA can be claimed for travel fare or tickets within India only, expenses incurred for accommodation, or any other fee will not be eligible for exemption.
- An employee can produce his/her travel-related bills for the journey through air, train, bus or any other mode of transport and save on taxable income.
- LTA is added to the salary structure by the employer based on various factors such as title, position, pay scale, etc.
The LTA benefits can be availed only if it is a part of the salary structure. You can claim for the LTA when you have travelled alone or when with family as well. LTA covers the travel expenses for family members – parents, siblings, spouse, and children as well, provided you have travelled with them on those occasions.
Conditions for claiming Leave Travel Allowance
Following are the condition for claiming the LTA:
- Exemption must be available on actual journey only.
- Also, only domestic travel (travel within India) is considered while claiming exemption while international trip or travel is not eligible for claiming exemption.
- This exemption is available to the employee or with his family.
Here, family includes spouse, children and wholly or mainly dependent parents, brothers or sisters of the employee. Also only 2 children will be considered for claiming this exemption, however if twins or multiple children are born on second occasion then the exemption will be available for total children born on first and second occasion.
Calculation and Maximum Limit of LTA
According to the provisions of the income tax act no monetary limits either as percentage or absolute amount exist, in respect to LTA. Thus, the employer can freely decide what component of salary he wants to allow his employee to claim as LTA. However, prudence demands that the amount of LTA should be reasonable in relation to the overall salary of the employee.
Eligible exemption
Exemption is only available on actual travel cost i.e, fare paid by the employee, no exemption is available for local travel, sightseeing, accommodation, food etc. Also exemption is limited to LTA provided by the employer only.
Exemption available for various modes of transport
| S.No. | Particulars | Eligible Exemption |
| 1 | Where place of origin of journey and destination are not connected by any recognized public transport system | The amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. |
| 2 | Where place of origin of journey and destination are not connected by rail (partly/fully) but connected by other recognized public transport | The amount restricted to 1st class or deluxe class fare by the shortest route to the place of destination |
| 3 | Where place of origin of journey and destination are connected by rail | The amount spent for any mode of transport other than by air, restricted to air-conditioned first class rail fare by the shortest route to the place of destination |
| 4 | Journeys performed by air | The amount is restricted to the air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination. |
Note: Exemption is available for only 2 journeys travelled in a block of 4 calendar years, current block is 2018-21. If exemption is not availed during the respective block for one or two journey, then the same could be carry forwarded and could be claimed in the first calendar year of immediately succeeding block. Also in case of multi destination journey exemption is available for the eligible travel cost from place of origin to the farthest place in vacation by the shortest route.
LTA Cash Voucher Scheme
As of now it is impossible for anyone to travel due to strict COVID guidelines therefore to help with this government launched the “Cash Voucher Scheme” to benefit public and private sector employees.
The various criteria for the scheme are:
- The exemption is available for F.Y. 2020-21
- This scheme shall count as usage of 1 trip out of the 2 journey during the block of 4 calendar years.
- The employee and his family have to incur specified expenditure on purchase of goods and services having GST rate of 12% or more.
- The above purchases should be made between 12 Oct 2020- 31 March 2021
- The expenditure should not exceed Rs. 36000 or 1/3 rd of the specified expenditure, whichever is lower.
- The payment for such expenditure should be made via digital or electronic mode only.
- Where you don’t avail of the scheme there either you can carry forward the amount to next year or pay it to you after deducting TDS on it.
Note. This scheme will be available to the employee opting for old tax regime only.
Documents required for claiming LTA
To claim for LTA, an employee is required to submit the LTA form along with the travel bills. Though the IT Department or the employer are not required to check the tickets or bills, it is recommended to preserve the tickets, boarding pass, and other documents, so it can be provided to the LTA claim assessing officer if required.
Final Words
Even though the rules set by Income-tax Department are crystal clear, the accounts department of several organisations may follow their own set of guidelines. Therefore, before availing of any such exemption, it’s better to get clarity, well in advance.
