Leave Travel Allowance (LTA)

The Income Tax Act, 1961 gives different exemptions to salaried class apart from deductions like LIC premium, housing advance revenue and so on While the deduction is a reduced thing from a total taxable income, exemption implies exclusion from total taxable income. Such exemptions empower the employers to structure the Cost to Company (CTC) of employees in a tax-efficient way. One of such exemptions accessible to salaried class under the law and furthermore generally utilized by employers is Leave Travel Allowance (LTA)/Leave Travel Concession(LTC). LTA exclusion is likewise accessible for LTA received from previous manager w.r.t travel after the retirement of service or end of service

What is LTA?

As it is clear from the name it is an exemption for allowance or assistance which is received by the employees from his employer for traveling on leave. It may sound very easy but many things are needed to be kept in mind while planning the travel for claiming leave travel allowance exemption. Various provisions are available in income tax act which lays down provisions for claiming exemption of leave travel allowance.

Leave Travel Allowance Benefits

Leave Travel Concession or allowance is an essential part of the salary structure and also acts as a great tax saving tool under the provisions of the Income Tax Act,1961.

• The first benefit of Leave Travel Allowance is that it is an addition to the basic salary. The entitlement is based on various factors like designation, pay scale, position, etc.
• An employee will be only able to claim the benefits of Leave travel concession/ leave travel allowance if the employee has Leave Travel Allowance entitlement and it part of the salary structure.

Conditions for claiming leave travel allowance

There are certain conditions or requirements which are needed for claiming exemption. The conditions are as follows:

• The actual journey is very essential to claim the exemption
• Only travel that is done domestically is considered for exemption which means travel within India. International travel is not considered under leave travel allowance
• The travel exemption is available for the employee alone or with the family. Her family includes the employee’s spouse, children, and wholly or mainly dependent parents, brother, and sister of the employee.
• This exemption is not accessible for more than two children of an employee who are born after 1^st October 1998.  Children who are born before 1^st October 1998 do not have this restriction.

Eligible LTA Exemption

The LTA exemption is only available on the actual costs which include air, rail, or bus fare which is incurred by the employee in his travel journey. No expenses which include sightseeing hotel accommodation, food, etc are included in this exemption. The exemption is also limited to the LTA which is provided by the employer For instance, if the LTA provided by the employer is Rs.40,000 and the actual eligible travel cost which is incurred by the employee is Rs.20,000. In this case, the exemption is available only to the extent of Rs.20,000 and the balance which is of Rs.20,000 will be included in the taxable salary income of the employee.

Exemptions on various modes of transport

• when the place of journey and destination are not connected by any type of recognized public transport then the eligible exemption, in this case, will be the amount which is equivalent to the air-conditioned first-class rail fare for the distance of the journey which shall be completed via the shortest route as if the journey has been performed by rail.
• when the place of the journey and the destination are not connected by rail partly or fully but are connected through recognized public transport then In this case the eligible exemption will be the amount restricted to first-class or deluxe class fare via the shortest route to the place of the final destination.
• when the place of journey and destination are connected via rail then the exemption which is eligible is the amount that is spent for any mode of transport available besides air which is restricted to air-conditioned first-class rail fare via the shortest route to the place.
• when the journey is performed by air then the exemption which is eligible will be the amount which is restricted to the air economy fare of the national carrier (Indian Airlines or Air India) via the shortest route to the final destination place.

Leave Travel Allowance exemption rules

Leave Travel Allowance exemption is accessible for travel allowance which is provided by the employer to the employee and his family. The exemptions are the following:

• Employees can travel to any place in India. International trips are not considered under this benefit.
• Leave Travel Allowance exemption is not considered if it is encashed without even traveling to any place. The whole Leave Travel Allowance amount will be taxable.
• The employee’s family can also travel without the employee and can still claim the exemption available under section 10(5). Family under this rule refers to the employee’s spouse, two children, siblings of the employees.
• The exemption is also available to the employee for traveling or retirement of his service.
• The cost of travel is only taken into view for exemption and no other amount is taken into consideration for the deduction.

Can leave travel allowance exemption be claimed on every vacation

The leave travel allowance can only be claimed for only two journeys which are performed in a block of four calendar years. So it means that it can not be claimed on every vacation.

Block Year

Block year is not as same as the financial year it is different from the financial year. The government decides the leave travel exemption purpose. The first 4 block year started in 1986. The block years are 1986-1989, 1990-93, 1994-97, 1998-2001, 2002-2005, 2006-2009, 2010-13, etc. the block that is applicable for the current period is the calendar year 2018-21.

Procedure to claim Leave Travel Allowance

The procedure which is needed to claim to leave travel allowance is employer-specific. Employer announces the last date in which the leave travel allowance can be claimed by the employees and which may require employees to furnish travel proof like a boarding pass, tickets which need to be provided by the travel agent with the mandatory certificate. It is not compulsory for employers to collect travel proof but it is always for employees to keep duplicates for their records and to also submit to the employer which is based on the leave travel allowance policy of the company or the tax authorities when demanded.

Multi-destination journey

Income tax provision gives exemption w.r.t travel cost brought about on leave to any place in India. Conditions relating to the mode of transport likewise make reference to the spot of 'origin' to the spot of 'destination' and the route which should be the briefest accessible route. Consequently, if a worker is traveling to better places in a solitary vacation, the exemption must be benefited for the travel cost qualified from the spot of origin to the farthest spot in the vacation by the most limited conceivable route.

Carryover concession for Leave Travel Allowance

Leave Travel Allowance (LTA) accompanies a carry forward highlight. You can carry forward your Leave Travel Allowance in the circumstance that it has not been utilized. It tends to be presented and guaranteed in the main year of the next block. Here we might want to make reference to that only one LTA can be presented and guaranteed in the principal year of the next block. For example, "the 4-year block for your LTA is 2014-2017. During that period, assuming you didn't guarantee LTA or asserted it just a single time, you will be permitted to carry forward one LTA to 2018 (first year of next block, for example, 2018-21). Hence, from first Jan 2018 to 31st Dec 2021, you will actually want to guarantee LTA multiple times.

LTA in case of job switch

If an individual switches jobs he can still claim for leave travel allowance not only from the current organization but also from the previous employer if the concession is not unutilized. For instance, in the 2010-2013 block the individual claimed leave travel allowance in 2011 and in 2012 the individual switched his job. In that case the said individual can still claim his second journey from his new employer.

Documents needed for claiming Leave Travel Allowance

-To claim the benefit of leave travel concession or leave travel allowance the employee has to furnish the following documents to the employer: -The first document which needs to be submitted is the Leave Travel Allowance Form -Travel bills, boarding passes, flight or rail tickets, and other related documents. When the Leave Travel Concession claim is submitted and is approved by the employer then the employer issues Form 16 which will contain all the necessary details of the allowance which is paid for. The other expenses which are incurred on travel will be taxable.

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