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. An 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. Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B (Commonly known as LTA Rules), provides for the exemption and outlines the conditions subject to which LTA is exempt. Through this write-up, I want to shed light on the taxability and some other interesting relevant aspects which you as a salaried employee must keep in mind.

Taxability of Leave Travel Allowance - Section 10(5)

Exemption of Fare Only As per LTA Rules, LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. The total cost of the holidays is not covered, only the travelling cost is covered.

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Travel within India only allowed- As per LTA Rules, travel has to be undertaken within India and overseas destinations are not covered for exemption.

Exemption on Actual Travel Expense – For example, where an employer provides LTA of Rs. 25,000, but an employee spends only Rs. 20,000 on the travel cost, then the exemption is limited to only Rs. 20,000. Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay etc.

Meaning of Family for LTA :– As per LTA Rules, the meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you. An individual would not be able to claim the exemption in relation to his parents, brother or sisters unless they are wholly or mainly dependent on the individual.

Restriction on Number of Children for Claiming LTA :- As per LTA Rules, exemption is not available for more than two children of an individual born after October 01, 1998. This restriction does not apply in respect of children born before this date, and also in cases where an individual, after having one child, begets multiple children (twins or triplets or quadruplets, etc.) on the second occasion. The term “Child” includes a step-child and an adopted child of the individual.

Is LTA exemption available every year?

No. The LTA rules provide for an exemption only in respect of two journeys performed in a block of four calendar years. The current block runs from 2018-2021. If an individual does not use their exemption during any block on any one or on both occasions, their exemption can be carried over to the next block and used in the calendar year immediately following that block.

In such cases, the journey performed to claim such exemption will not be counted for the purposes of regulating future exemptions allowable for the succeeding block. For example, Mr. X joins an organisation on April 1, 2016 and is entitled to a LTA of Rs 30,000 per annum (financial year 2016-17).

X undertook a journey in December 2016 and used his exemption. However, for his LTA entitlement for 2016-17, he did not undertake a journey during the calendar year 2017.

He can undertake the journey in 2017 to claim the exemption in relation to the LTA. He would also be able to use the LTA benefit for two other journeys which he can undertake in the current block 2018-21 in relation to his LTA entitlement for future years.

Proof of travel to claim LTA

Supreme Court has held in the case of Larsen & Toubro and ITI that employers are under no statutory obligation to collect bills and details to prove that the employees had utilised the amounts obtained against these claims on travel and related expenses.

Employers while assessing the travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on its policy. The Judgement of Supreme Court has only moved the responsibility from the employer to the employee, the assessing officer can still ask for the employee to provide details of travel.

The individual however needs to keep copies for his or her own records. Such proofs are helpful at the time of the audit of the tax return of the individual. Proof of travel could be, for example, tickets, boarding passes, invoice of travel agent, duty slip etc .

Here we would like also to draw attention of the employers to Circular No. 8/2013 dated 10-10-2013 which says that in respect of LTA The employer has to satisfy the obligation that leave travel (fare) concession is not taxable in view of section 10(5) the employer is not only required to be satisfied about the provisions of the said clause but also to keep and preserve evidence in support thereof. In our opinion the circular failed to take into account SC Judgment in the case of Larsen & Toubro and ITI and Employer are not bound to mandatorily preserve the Documents.

During the Fringe Benefit tax (FBT) regime, provision of paid holidays, including travel cost to any place, stay expenses etc. were subject to FBT in the hands of employers and were not taxable in the hands of individuals. Many employers extended the paid holiday benefit instead of LTA.

Now with the elimination of FBT , with effect from. April 1, 2009, paid holiday benefit is fully taxable in the hands of employees and, therefore, employers are reintroducing the LTA element by withdrawing the paid holidays benefit.

Does claiming LTA in alternate years mean that the two year entitlement gets added together?

It does. If you are entitled to an LTA of Rs.10,000 per year and do not utilize it for the the first year it is carried forward to the next year. In the second year you can claim the entire amount (Rs.20,000) as tax exempt provided you spend it according to the specification in LTA tax laws as detailed above.

Carry over concession for Leave Travel Allowance

Leave Travel Allowance (LTA) comes with a carry forward feature. You can carry forward your Leave Travel Allowance in the situation that it has not been used. It can be brought forward and claimed in the first year of the next block. Here we would like to mention that only one LTA can be brought forward and claimed in the first year of the next block. For instance, “the 4-year block for your LTA is 2014-2017. During that period, if you did not claim LTA or claimed it only once, then you will be allowed to carry forward one LTA to 2018 (first year of next block, i.e. 2018-21). Thus, from 1st Jan 2018 to 31st Dec 2021, you will be able to claim LTA three times. However, if you do not claim the LTA (brought forward from the previous block of 2014-17) in the first year of the current block (1st Jan 2018 to 31st Dec 2018).

Can I Claim LTA Twice in a Year

Though you can claim two journeys in a block of four years, you can claim the LTA benefit just once in a year. You cannot claim both the journeys in one year. So, while a person can get an income tax exemption for two journeys in a block of four calendar years, he can make a trip only once a year. If you make two trips in a year, you lose one. One way out is to claim one and make your spouse claim the other in case your spouse is also working.

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 2010-13 block, you claimed LTA in 2011. In 2012, 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.

Amount Exempted under LTA Rules

1. Journey performed by Air – Economy Air fair of National carrier by the shortest route or the amount spent which ever is less will be exempt

2. Journey performed by Rail – A.C. first class rail fare by shortest route.or amount spent which ever is less will be exempt.

3. Place of origin and destination place of journey connected by rail but journey performed by other mode of transport other than air- A.C. first class rail fare by shortest route or amount spent which ever is less.

4. Place of origin & destination not connected by rail(partly/fully) but connected by other recognised Public transport system – First class or deluxe class fare by shortest route or amount spent which ever is less.

5. Place of origin & destination not connected by rail(partly/fully) and not connected by other recognised Public transport system also – AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent ,which ever is less.

Extract of Section 10(5)

“Section 10(5) in the case of an individual, the value of any travel concession or assistance received by, or due to, him,—

(a) from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;

(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,

subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.

Explanation.—For the purposes of this clause, “family”, in relation to an individual, means—

(i) the spouse and children of the individual ; and

(ii)  the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual;

Conditions for the purpose of section 10(5) as Prescribed in Rule 2B of Income Tax Rules- Extract of Rule 2B

2B. (1) The amount exempted under clause (5) of section 10 in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,—

(a) on leave to any place in India;

(b) to any place in India after retirement from service or after the termination of his service, shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely :—

(i) where the journey is performed on or after the 1st day of October, 1997, by air, an amount not exceeding the air economy fare of the national carrier by the shortest route to the place of destination;

(ii) where places of origin of journey and destination are connected by rail and the journey is performed on or after the 1st day of October, 1997, by any mode of transport other than by air, an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and

(iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed on or after the 1st day of October, 1997, between such places, the amount eligible for exemption shall be :—

(A) where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and

(B) where no recognised public transport system exists, an 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) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 1986 :

=[Provided that nothing contained in this sub-rule shall apply to the benefit already availed of by the assessee in respect of any number of journeys performed before the 1st day of April, 1989 except to the extent that the journey or journeys so performed shall be taken into account for computing the limit of two journeys specified in this sub-rule.]

(3) Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calendar years shall be eligible for exemption.

Explanation : The amount in respect of the value of the travel concession or assistance referred to in this sub-rule shall not be taken into account in deter-mining the eligibility of the amount in respect of the value of the travel con-cession or assistance in relation to the number of journeys under sub-rule (2).]

[(4) The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual after 1st October, 1998 :

Provided that this sub-rule shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.]

Republished with amendments

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284 responses to “Taxability of Leave Travel Allowance (LTA) – Section 10(5)”

  1. Ashish says:

    Kya journey me go to back both include hita hai?
    Ya phir only go or back separate note hai.

  2. SUKET says:

    Does Service Charge and GST charged by Travel Agent is included in LTA exemption

  3. Ramesh Narahari Radharam says:

    Dear All,
    Can we pay lta on monthly basis please suggest.

  4. ravi goyal says:

    Dear Sir,
    if i haven’t used my LTA for 2017-2018 and claimed as taxable amount. But company has carry forwarded it in 2018-2019. Is there any provision that company will have to release last financial year’s LTA within some time frame this year.

  5. S ghosh says:

    I went to chennai by economy class Air from Kolkata (my base location ) in Mar18 & came back on the same day . It was a Saturday & official holiday for my office – so no leave required to be applied .
    Can I claim LTA ??

  6. SUNIL KUMAR SINHA says:

    Ihave availed only once the LTA facilities very early in the services i have joined. i am going to retire on Jan 2025. how LTA can I avail
    many

  7. Aditi says:

    What are the rules ifCEO , Director or owner of comcpany is travelling ?

  8. Deepak Gupta says:

    I traveled 22 Dec 2017 to 29 Dec 2017 , Travel LTA block comes ending December 2017 , company paid me as LTA in JAN 2018 , now company HR not allowed me LTA benefit as LTA paid in Jan2018 with below Remark “If the LTA amount is taken in Jan – Mar 2018 , then the same will be taxed in FY 2017-18. If you have travelled in the same period it will be exempted.”
    HR Says LTA paid in Jan 2018 , it comes in new Block

    please provide you Expert Comment on this .

  9. AMIT GUPTA says:

    Sandeep Sir,
    Thanks for your efforts to guide individual for their specific quarry.
    Sir, I have taken one TAXI TRIP from Delhi-Kota-Hardwar-Delhi, Wherein Delhi is my origin place of work/residence.

    Kindly guide, whether I am entitled to claim LTA through Taxi while I have booked it from OLA and also got ONLINE RECEIPT of it.
    Regards
    Amit Gupta
    09313 4444 36

    • ADP Garg says:

      When you have a receipt from OLA why you want to claim Taxi fare, in other words, you are entitled for the amount you actually spent on travel.

  10. Sudeep Kumar says:

    I have not opted for LTA in my company for 2017-18. But I just completed one trip of 5 days with my family in February 1st week 2018.
    How can I claim this under LTA; whether there is possibility of claiming this trip in my next year LTA.

  11. sPenumalli says:

    Hi,
    I was on earned leave(2) + LWP(3) = 5 days during my travel.Can i claim LTA for this trip?

  12. Pradyut Mullick says:

    I visited last october Shimla manali Rohtang pass. All things are booked thru Travel Agent having PAN and GST no. Bill of Travel Agent bifurcated Hotel and Transportation cost separately. Whether i can claim Transportation cost in my LTA Claim ?

  13. Srikant says:

    I booked flight ticket in a group with my friends.Amount shows the combined amount for everyone.How can I claim LTA exemption only for me?

  14. Mayank Rustagi says:

    Hi,

    Wanted to know the rules on crediting LTA with Salary. many companies credit it on monthly basis and many argue that it should be annually. So Can you help me with the ruling or Act clause no. that mentions that LTA can be credited on monthly basis too.
    Thanks,
    Mayank

  15. Reshma says:

    I will be travelling in January 2018, can I claim LTA tax exemption in FY 2017-2018

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