Important Keyword: Form 12BB, LTA, Salary Components, Salary Income.
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LTA (Leave Travel Allowance): Meaning, Rules, Tax Exemptions and Conditions to claim
Traveling indeed provides numerous benefits, offering a break from the daily grind and contributing to reduced stress levels and enhanced mental and emotional well-being. However, embarking on vacations can sometimes strain the budget. To alleviate this financial burden, the Income Tax Act extends several exemptions to salaried individuals for such expenses. One notable exemption is the Leave Travel Allowance (LTA). LTA represents an allowance provided by employers to their employees for vacations within India.
LTA: Meaning
Leave Travel Allowance (LTA) stands as an allowance integral to an employee’s Cost to Company (CTC), facilitating travel either individually or with family members to any destination within India. This benefit can be availed under the following circumstances:
- While on authorized leave.
- Following retirement from service.
- After termination of service.
The Income Tax Act delineates specific guidelines for seeking exemption on LTA.
Conditions to Claim LTA Exemption
Section 10(5) of the Income Tax Act, coupled with Rule 2B, delineates the conditions and limitations for the exemption of leave travel allowance:
- The leave travel allowance should be an integral component of the employee’s salary structure.
- Exemption is applicable for the actual expenses incurred by the employee and their family solely for domestic travel.
- The definition of family for the purpose of leave travel allowance includes the spouse, children, as well as parents, brothers, and sisters who are wholly or mostly dependent on the employee.
- The exemption can be claimed for a maximum of two children born after 01/10/1998, without any restrictions for children born before this date.
- The exemption covers only the travel expenses incurred during the trip, including travel by rail, air, or any other public transport. Expenses related to hotel accommodation, food, etc., are not included.
- Exemption is available for only two trips in a block of four calendar years. The current block for leave travel spans from 2022 to 2025.
- If the exemption is not utilized during the block period, it can be carried over to the next block and utilized in the first year of the subsequent block.
Let’s understand with an example:
Certainly, if an employee does not utilize their Leave Travel Allowance (LTA) during the block of 2018-2021, they are permitted to carry forward a maximum of one unutilized LTA to be utilized in the subsequent block of 2022-2025. Therefore, if the employee avails the LTA in April 2022, it will be considered for the block of 2018-2021. Consequently, they will be eligible for exemption concerning that journey, and two additional journeys can be availed for the block of 2022-2025.
| Year of Journey | LTA Block year 2018-2021 | LTA Block year 2022-2025 |
| September 2020 | Exemption claimed in September 2020 | Not Applicable |
| July 2021 | Not Claimed | An exemption can be claimed in 2022 (carried over from the previous block) |
| May 2023 | Not Applicable | An Exemption can be claimed in May 2023 |
| August 2024 | Not Applicable | Exemption can be claimed in August 2024 |
Leave Travel Exemption: Eligibility
The Leave Travel Allowance (LTA) exemption is solely applicable to the actual travel expenses incurred. Other expenses such as sightseeing, hotel accommodation, and food are not eligible for this exemption. Moreover, the exemption is restricted to the LTA amount provided by the employer. For instance, if the actual expense incurred amounts to INR 50,000, but the LTA included in the salary is INR 35,000, then the maximum exemption available would be INR 35,000 only.
Exemption when various modes of transport are used for travel
| Sr. No. | Journey Performed By | Limit |
| 1. | Air | The actual amount spent is restricted to airfare of economy class national carrier by the shortest route possible |
| 2. | Any other mode: (i) Where rail service is available (ii) Where rail services are not available (a) a recognised public transport system exists (b) no recognised public transport system exists | The actual amount spent (mode other than air) is restricted to the cost of travel in first class A.C. through rail by the shortest route possible The actual amount spent is restricted to airfare of economy class national carrier by the shortest route possible The actual amount spent is restricted to first class or deluxe class fare by the shortest route possible The actual amount spent is restricted to first class or deluxe class fare by the shortest route possible |
| 3. | Multi-Destination | The exemption available will be for the travel cost eligible from the place of origin to the farthest location |
How to Claim Exemption on Leave Travel Allowance?
To claim the Leave Travel Allowance (LTA) exemption, employees need to furnish details in Form 12BB and provide supporting evidence. This can include boarding passes, air tickets, train tickets, and invoices from travel agents. These documents serve as proof of the journey undertaken, and employees should submit them to their employers for verification and processing of the LTA exemption.
Read More: Transport & Conveyance Allowance – Taxability & Exemptions
Web Stories: Transport & Conveyance Allowance – Taxability & Exemptions
Official Income Tax Return filing website: https://incometaxindia.gov.in/
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