Leave Travel Allowance (LTA / LTC)
Leave Travel Allowance (LTA) is a type of allowance which is given to an employee from his employer to cover his travel expenses when he is on leave from work. Sometimes it is also known as Leave Travel Concession (LTC). LTA is exempt from tax u/s 10(5) of Income Tax Act, 1961.
LTA can be broadly categorized into two parts:
-
Any travel concession or assistance received by employee from his employer for himself and his family to cover expenses incurred in travelling while on leave.
- Any travel concession or assistance received by employee from his former employer for himself and his family to cover expenses incurred in travelling post retirement or termination of service.
Who comes under family?
For the purpose of this section, family includes:
- Spouse of individual
- Children of individual
- Parents of individual (mainly or wholly dependent on the individual)
- Brothers and sisters of individual (mainly or wholly dependent on the individual)
What kind of expense is exempt as LTA?
People incur several kinds of expenses during their holiday trip but not all of them are covered by LTA. Expenses made on food, shopping, etc. are not tax deductible.
Only the expenses made by employee on travelling are born by the employer for which he provides Leave Travel Allowance to the employee.
Depending on the mode of transportation chosen and connectivity of the place, amount of exemption is decided.
1) In case of travel by Air
Then economy air fare of national carrier by the shortest route or the actual amount spent on travel whichever is less is exempt from tax.
2) In case of travel by Rail
Then A.C. first class rail fare by shortest route or actual amount spent on travel whichever is less is exempt from tax.
3) If the origin and destination spots of journey are connected by rail but journey is performed by other mode of transport and not air or rail
Then A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
4) If the origin & destination points are not connected by rail or air (partly/fully) but connected by other recognized Public transport system
Then first class or deluxe class fare of such transport by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
5) If the place of origin & destination are not connected by rail or air (partly/fully) and also not connected by other recognized Public transport system
Then AC first class rail fare by shortest route (assuming that the journey was performed by rail) or the amount actually spent on travel, whichever is less is exempt from tax.
How often can one claim LTA?
- Tax Exemption on LTA can be claimed twice in a block of 4 years.
- However, tax exemption on LTA cannot be claimed more than once in a year.
- The current block of 4 calendar years is from 2014-2017.
- If the assessee did not use LTA provided by his employer either once or twice (the permitted limit) in a 4 years block period then he can still claim LTA exemption by using LTA in the year immediately succeeding the 4 years block period. It is known as carry over concession.
Restriction on number of child for claiming LTA
- Tax exemption on LTA cannot be claimed for more than 2 children on an individual. This restriction is not applicable if children are born before October 1st 1998.
- Children born out of multiple birth after the first child will be treated as one child only. So the above mentioned restriction will not be applicable in this case also.
Tax Exemptions
Leave Travel Allowance (LTA) is a type of allowance which is given to an employee from his employer to cover his travel expenses when he is on leave from work. Sometimes it is also known as Leave Travel Concession (LTC). LTA is exempt from tax u/s 10(5) of Income Tax Act, 1961.
LTA can be broadly categorized into two parts:
-
Any travel concession or assistance received by employee from his employer for himself and his family to cover expenses incurred in travelling while on leave.
- Any travel concession or assistance received by employee from his former employer for himself and his family to cover expenses incurred in travelling post retirement or termination of service.
Who comes under family?
For the purpose of this section, family includes:
- Spouse of individual
- Children of individual
- Parents of individual (mainly or wholly dependent on the individual)
- Brothers and sisters of individual (mainly or wholly dependent on the individual)
What kind of expense is exempt as LTA?
People incur several kinds of expenses during their holiday trip but not all of them are covered by LTA. Expenses made on food, shopping, etc. are not tax deductible.
Only the expenses made by employee on travelling are born by the employer for which he provides Leave Travel Allowance to the employee.
Depending on the mode of transportation chosen and connectivity of the place, amount of exemption is decided.
1) In case of travel by Air
Then economy air fare of national carrier by the shortest route or the actual amount spent on travel whichever is less is exempt from tax.
2) In case of travel by Rail
Then A.C. first class rail fare by shortest route or actual amount spent on travel whichever is less is exempt from tax.
3) If the origin and destination spots of journey are connected by rail but journey is performed by other mode of transport and not air or rail
Then A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
4) If the origin & destination points are not connected by rail or air (partly/fully) but connected by other recognized Public transport system
Then first class or deluxe class fare of such transport by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
5) If the place of origin & destination are not connected by rail or air (partly/fully) and also not connected by other recognized Public transport system
Then AC first class rail fare by shortest route (assuming that the journey was performed by rail) or the amount actually spent on travel, whichever is less is exempt from tax.
How often can one claim LTA?
- Tax Exemption on LTA can be claimed twice in a block of 4 years.
- However, tax exemption on LTA cannot be claimed more than once in a year.
- The current block of 4 calendar years is from 2014-2017.
- If the assessee did not use LTA provided by his employer either once or twice (the permitted limit) in a 4 years block period then he can still claim LTA exemption by using LTA in the year immediately succeeding the 4 years block period. It is known as carry over concession.
Restriction on number of child for claiming LTA
- Tax exemption on LTA cannot be claimed for more than 2 children on an individual. This restriction is not applicable if children are born before October 1st 1998.
- Children born out of multiple birth after the first child will be treated as one child only. So the above mentioned restriction will not be applicable in this case also.