Income Tax Treatment of Leave Travel Allowance (LTA)

We go on travel with our family and if we can get tax benefits on such traveling expenses, than why waste to it. This Article on Leave Travel allowance or LTA explains how to claim LTA benefit and Income Tax Provisions related to the same.

Leave Travel Allowance (LTA) is basically defined as the cost of travel granted to employees to travel anywhere in India, while on leave from work. It is allowed twice in a block of four calendar years. So this benefit is available only to salaried Assessee.

These blocks of 4 years are predefined by the government. These are:

And so on. The current block is 2018-2021. So, for the period 2018-2021 one can claim this exemption for any two occasions.

(These years are calendar years, and not financial years.)

EXEMPTION, WILL HOWEVER IN NO CASE EXCEED, ACTUAL EXPENDITURE INCURRED ON THE PERFORMANCE OF JOURNEY.

1. Important Notes on Leave Travel Allowance (LTA)

→ In case the LTC is encashed without performing the journey, the entire amount received by the employees would be taxable

→ Family for this purpose includes:

a) The spouse and children of the employee

b) Parents, brothers and sisters of the employee, who are wholly or mainly dependent on him.

→ The exemption is allowed only in respect of fare.

→ Expenses incurred on conveyance from residence to the railway station/airport/bus stand and back, boarding and lodging or expenses during the journey will not qualify for exemption.

→ Exemption is available in respect of shortest route.

→ Exemption available only in respect of two surviving children after 1.10.1998.

2. Conditions for Exemption of Leave Travel Allowance

Journey is performed by air: amount not exceeding air economy fare of the national carrier by the shortest route to the place of destination will be exempt.

Journey is performed by rail: amount not exceeding AC first class rail fare by the shortest route to the place of destination will be exempt.

Place of origin and destination of journey are connected by rail but journey is performed by any mode of transport other than air: amount not exceeding AC first class rail fare by the shortest route to the place of destination will be exempt.

Place of origin and destination of journey are not connected by rail (partly/fully) and the journey is performed between such places: amount not exceeding 1^st class or deluxe class fare (if recognised public transport system exist). Equivalent A.C. first class rail fare (if no recognised public transport system exist) by the shortest route to the place of destination will be exempt.

3. Proof required for claim of LTA/LTC ???

Tickets like – railway ticket and Airlines ticket (with boarding pass) is valid proof for claiming LTA benefit.

4. How to make a claim of Leave Travel Allowance??

• Give a written declaration to your employer with travel details and the amount spent.
• As per the Supreme Court, if you submit a declaration stating the amount you spent, you don’t need to give the actual bills.
• But it is recommended you keep the tickets handy in case your employer or the tax authorities such as Assessing Officer need to see it later or to satisfy themselves about the genuineness of the claim.
• Your employer will certify the LTA exemption in Form 16.

5. Treatment of LTA in case of Switch of JOB??

If you switch jobs, you can get the LTA not only from your present organisation but also from your former employer, if the concession is lying unutilised. Let’s say that, in the 2014-17 block, you claimed LTA in 2014. In 2015, you switched jobs. You can still claim your second journey with your new employer. Of course, your new employer will ask to look at your earlier tax returns to see whether it has been claimed or not.

LTA exemption is available for the shortest route travelled and can be availed only for travel on working days. You can also claim LTA while filing your taxes. Proofs are not needed by the I-T department initially, but it is always better to keep them handy.

6. FAQ On Leave Travel Allowance (LTA)

Q.1 Under which Income Tax Act section LTA exemption comes?

Ans: The exemption comes under Section 10(5) of the Income Tax Act.

Q.2 If you have not availed LTA in one block, can you carry forward LTA benefit ?

Ans: Yes, The exemption doesn’t lapse – it can be carried forward to the next block of 4 years.The only condition in this case is that the exemption has to be availed in the very first year of this subsequent block.

Q.3 Can Husband and wife both claim LTA benefit ?

Ans: Yes, both the Husband and wife can effectively claim LTA benefit 4 times in block of four years . ie two by husband and two by wife. However, both of them cannot claim for the same journey.

Q.4 If a person lost the boarding passes. What are the alternatives ?

Ans: Ask your airline company to issue a letter, about your travel. This letter will be sufficient in case Income tax department ask for the proof.

Q.5 If a person travelled two times in a year Oct-14 and Dec-14, and have not availed any LTA benefit before (2014-2017 block or 2018-2021 block). Can that person avail LTA benifit for both travels ?

Ans: Yes that person can take benefit of both travel in this block year

Q.6 Is International travel permitted?

Ans: No, LTA covers only domestic travel.

Q.7 Can LTA be claimed if the actual claiming person has not travelled?

Ans: No, LTA cannot be claimed for the family if you as a claiming person are not included in the travel.

Q.8 What happens if you don’t travel at all?

Ans: If you do not travel, you can still get the LTA amount, but you will have to pay tax on the same based on your tax bracket

If you have any queries please feel free to mail me at [email protected]

(Republished with Amendments carried out by Taxguru Team)