Leave Travel Allowance (LTA): Exemption Limit, Claim Rules, & Eligibility

Leave Travel Allowance is a tax-exempt benefit offered to employees to cover travel expenses for domestic trips. It allows exemptions on actual travel costs for the employee and their family, excluding food, accommodation, or sightseeing costs. The exempti

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What is Leave Travel Allowance (LTA)?

Leave Travel Allowance (LTA) is a popular employee benefit that helps employees cover their travel-related expenses. It is an integral part of the Cost to Company (CTC) package, much like H ouse Rent Allowance (HRA).

While Leave Travel Allowance clearly supports employees in achieving a better work-life balance by making travel more affordable, another key advantage of this benefit is its tax savings. Leave Travel Allowance provides tax exemptions under the Income-tax Act, 1961, adding significant value to salary planning. If you are a salaried employee who has opted for the old tax regime, the following sections will help you understand the tax implications of Leave Travel Allowance.

Eligibility Criteria to Claim Leave Travel Allowance (LTA) Exemption

If you are an individual (citizen or non-citizen) who has incurred actual travel costs for yourself or your family members, you are eligible to claim a Leave Travel Allowance exemption. This means the Leave Travel Allowance amount provided by your employer will not be included in your taxable income, and you won’t have to pay tax on it. However, the expenses must be related to domestic travel and should be supported by proper documentation.

Step-by-Step Process to Claim Leave Travel Allowance (LTA)

Once you have checked your eligibility for LTA tax exemption, you should move ahead with the following steps to avoid last-minute surprises during ITR filing:

Plan your travel during the applicable block years specified by the Income Tax Department. If you missed claiming Leave Travel Allowance in the previous block, you could carry it over to the first year of the next block.
Collect and retain all necessary documents, such as tickets, boarding passes, and payment receipts. These serve as proof of travel.
Complete the Leave Travel Allowance claim form provided by your employer. Attach all the relevant documents and provide details about your travel, such as dates, destinations, and costs incurred.

Once submitted, your employer will review the claim and validate the provided documents. After approval, the exempt portion of Leave Travel Allowance will be credited, and any taxable portion will be added to your income.
When filing your Income Tax Return (ITR), ensure the claimed exemption aligns with the rules under the Income Tax Act. Retain a copy of the documents in case of scrutiny by the tax authorities.

Rules of Claiming Leave Travel Allowance

Now that you are familiar with the general guidelines for Leave Travel Allowance let us explore the detailed rules:

You must have incurred travel-related expenses to claim this exemption. This means that if your employer has provided you with an allowance but you have traveled anywhere, the entire allowance will be taxed.

Only domestic trips are covered under this exemption. So, if you have traveled outside the country, you cannot claim this exemption.
You must have incurred expenses for yourself or your family members including your spouse, children (maximum two), or dependent siblings or parents.
The Leave Travel Allowance rules also specify that only the amount incurred on traveling is exempt. Thus, if you have spent money on food, lodging, sightseeing, it will not qualify for exemption.
Only two vacations are covered in a block of four calendar years. For instance, if you have already claimed exemption two times in a block, the Leave Travel Allowance received for the third vacation will be fully taxed.

Advantages of Leave Travel Allowance

With all the rules and documentation requirements to follow, you might wonder if it is worth the effort to claim a Leave Travel Allowance. A quick glance at its benefits will help clear up any doubts:

As Leave Travel Allowance covers family members such as spouses, children, etc, you can travel with your family without worrying about the financial burden. This builds stronger family connections and contributes to improved mental well-being.
When you claim this exemption, you end up reducing your taxable income. As a result, you have to pay lower taxes and can save money for your long-term goals.
Leave Travel Allowance rules provide flexibility as you can choose to travel via air, rail, or road at your convenience.
For employers, Leave Travel Allowance serves as a valuable component of the employee benefits package. It aids in employee satisfaction and retention by enhancing the compensation structure.

Leave Travel Allowance Calculation

The following factors can help you accurately calculate the Leave Travel Allowance exemption limit while adhering to the applicable rules.

Eligible amount: The exemption is allowed only for the actual travel costs incurred, subject to the Leave Travel Allowance provided by the employer. Non-travel expenses are excluded.
Mode of Travel: Different exemption limits apply to each mode of travel. For instance, in the case of air travel, the exemption is restricted to the economy class fare for the shortest route to the destination.
Maximum Claims: You can claim a Leave Travel Allowance tax benefit for up to two journeys in a block of four calendar years.

Example of LTA

Let’s assume you receive a Leave Travel Allowance of ₹30,000 from your employer and have not yet availed of an exemption for two vacations in the current block. You travel within the country with your family and incur ₹40,000 as expenses, which are broken down into:

Actual airfare (economy class fare by the shortest route): ₹15,000
Accommodation: ₹20,000
Food: ₹5,000

In this case, you can claim ₹15,000 as an exemption because accommodation and food-related expenses are not covered. The balance amount will be included in your taxable income as follows:

Leave Travel Allowance received	₹30,000
Leave Travel Allowance exempted	₹15,000
Leave Travel Allowance taxed (included in taxable income)	₹15,000

How Much Amount Can Be Claimed Under LTA?

The Income Tax Rules specify that the exemption for Leave Travel Allowance must not exceed the taxpayer’s actual travel costs. Here, travel costs do not include expenses related to accommodation, local sightseeing, food, etc.

For instance, if you received ₹20,000 as Leave Travel Allowance and have spent only ₹10,000 on traveling, you can claim an exemption of only ₹10,000. The balance allowance must be taxed as per the slab rates of the income tax. Similarly, if you have not spent any amount on traveling, the entire allowance of ₹20,000 will be taxed.

LTA Exemption Rules for Various Modes of Transport

The LTA claim rules vary depending on the mode of transportation used for your travel. Here is a breakdown of the eligible amounts for different modes of transport, ensuring you claim the correct exemption based on your travel choices.

Transportation Mode	Exemption Amount
Air	● Economy class fare of the national carrier (Air India) by the shortest route or the actual travel expenses, whichever is lower.
Other modes, if rail connectivity is available	● First Class AC rail fare by the shortest route or the actual travel expenses, whichever is lower.
Other modes, if rail connectivity is not available	● Recognized public transport system is available: First class or deluxe class fare for the shortest route or the actual travel expenses, whichever is lower. ● Recognized public transport system is not available: First class AC rail fare for the shortest distance or actual travel expenses, whichever is lower.

Is it Possible to Claim LTA on Every Vacation?

Leave Travel Allowance provisions follow the principle of a four-year block set by the Government of India. The current block spans the calendar years 2022-2025, during which you can claim Leave Travel Allowance for a maximum of two vacations. Any travel beyond these two will not qualify for exemption.

If you do not claim both exemptions within a block, one unclaimed exemption can be carried forward to the next block. However, this carried-forward exemption must be utilized in the first year of the new block; otherwise, it will lapse.

For instance, if you took only one vacation during the 2018-2021 block, you would have one unclaimed exemption. This can be carried forward to the 2022-2025 block, but you must use it in 2022. Afterward, you can still claim up to two additional exemptions within the same block.

The following example explains this in detail:

Scenario 1: You take four vacations in April 2019, June 2022, September 2024, and March 2025. The exemption can be claimed over two blocks as follows:

Vacation taken on	Block 2018-21	Block 2022-25
April 2019	Exemption claimed	-
June 2022	-	Exemption claimed (As it is claimed in the first year of the block, it can be considered as carried forward from the previous block)
September 2024	-	Exemption claimed
March 2025	-	Exemption claimed

Scenario 2: You take four vacations in April 2019, June 2023, September 2024, and March 2025. The exemption can be claimed over two blocks as follows:

Vacation taken on	Block 2018-21	Block 2022-25
April 2019	Exemption claimed	-
June 2023	-	Exemption claimed (As it is not claimed in the first year of the block, it is not considered as carried forward from the previous block)
September 2024	-	Exemption claimed
March 2025	-	Exemption cannot be claimed (Maximum two vacations are allowed in one block unless carried forward)

Required Documents for Claiming Tax

As already mentioned, you must submit proof of your travel to claim the Leave Travel Allowance tax benefit. A proper record and submission of the following documents can avoid delays in claiming your tax benefits:

Original travel tickets for air, train, or bus travel, including both onward and return journey tickets
Employer’s Leave Travel Allowance claim form

Restrictions on Leave Travel Allowance

The following section summarizes the scenarios where the Leave Travel Allowance is not exempt. You can use this information for effective tax planning:

Leave Travel Allowance benefits are limited to travel expenses incurred within the geographical boundaries of India. International travel costs do not qualify for exemption.

This exemption covers only the actual travel costs and does not include expenses for food, lodging, or sightseeing during the journey.

The exemption applies only to the employee, their spouse, two children, and dependent parents or siblings. Travel expenses for other relatives, such as parents-in-law, are not eligible.

You can claim this exemption for a maximum of two journeys in a block of four years. Any additional claims during the same block are not exempted. If Leave Travel Allowance is not claimed in a block, only one exemption can be carried forward to the next block, and it must be utilized in the first year of the new block.

FAQs on Leave Travel Allowance

What does Leave Travel Allowance cover?

Leave Travel Allowance covers travel expenses incurred by the employee while on leave within India. It is limited to the cost of travel by air, rail, or road and does not include other expenses such as food, lodging, or sightseeing.

Can I claim LTA exemption twice in one financial year?

No, Leave Travel Allowance can only be claimed as an exemption twice in a block of four calendar years as per the Income Tax rules. However, unused exemptions can be carried over to the next block, subject to conditions.

Is LTA exemption available in the new tax regime applicable from the financial year 2023-24?

No, this exemption is not available under the new tax regime introduced in FY 2023-24. This regime does not allow exemptions or deductions like Leave Travel Allowance and focuses on lower tax rates instead.

If the employee’s parents-in-law travel with him, would the travel costs for the parents-in-law be claimed as an exemption?

No, Leave Travel Allowance tax benefit is available only for the employee, their spouse, children, and dependent parents or siblings. Parents-in-law are not covered under this exemption.

If I select the new tax regime at the beginning of the financial year and inform my employer about it, can I move to the old tax regime while filing the ITR to claim LTA benefits?

Yes, you can opt for the old tax regime while filing your Income Tax Return (ITR), even if you initially selected the new tax regime with your employer. This allows you to claim Leave Travel Allowance benefits and other exemptions available under the old regime.

If the boarding pass is lost, can LTA be claimed?

Yes, Leave Travel Allowance can still be claimed if the boarding pass is lost, provided you submit alternative proofs such as an airline ticket, payment receipt, and a declaration of travel. Employers may have specific documentation requirements for such cases.

What are the documents you need for air travel?

For air travel, you generally need the airline ticket, boarding pass, and proof of payment. Additional documents like a declaration of travel and employer-specific forms may also be required to claim Leave Travel Allowance.

Leave Travel Allowance (LTA): Exemption Limit, Claim Rules, & Eligibility

What is Leave Travel Allowance (LTA)?

Eligibility Criteria to Claim Leave Travel Allowance (LTA) Exemption

Step-by-Step Process to Claim Leave Travel Allowance (LTA)

Rules of Claiming Leave Travel Allowance

Advantages of Leave Travel Allowance

Leave Travel Allowance Calculation

Example of LTA

How Much Amount Can Be Claimed Under LTA?

LTA Exemption Rules for Various Modes of Transport

Is it Possible to Claim LTA on Every Vacation?

Required Documents for Claiming Tax

Restrictions on Leave Travel Allowance

FAQs on Leave Travel Allowance

What does Leave Travel Allowance cover?

Can I claim LTA exemption twice in one financial year?

Is LTA exemption available in the new tax regime applicable from the financial year 2023-24?

If the employee’s parents-in-law travel with him, would the travel costs for the parents-in-law be claimed as an exemption?

If I select the new tax regime at the beginning of the financial year and inform my employer about it, can I move to the old tax regime while filing the ITR to claim LTA benefits?

If the boarding pass is lost, can LTA be claimed?

What are the documents you need for air travel?

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