02 Mar Leave Travel Allowance (LTA) – Regulations, Claim Process, Eligibility Criteria, Tax Benefits, and Recent Developments
In the realm of income tax regulations in India, salaried individuals have access to various exemptions, extending beyond conventional deductions like premiums for Life Insurance Corporation (LIC) and interest on housing loans. These exemptions, distinct from deductions, entail specific types of income being completely exempt from taxation. This facilitates employers in structuring an employee’s Cost to Company (CTC) package with tax efficiency in mind.
Leave Travel Allowance (LTA), also known as Leave Travel Concession (LTC), stands as one of the widely utilized exemptions by employers, granting a benefit to the salaried workforce under the purview of the Income Tax Act, 1961. It’s noteworthy that LTA exemption extends to LTA received from a former employer concerning travel post-retirement or service termination. Within a four-year block, individuals can claim LTA for two years. The current block spans from 2022 to 2025.
Recent Development:
Under the new tax regime, the tax exemption on leave travel allowance is no longer applicable.
Understanding Leave Travel Allowance (LTA):
Leave Travel Allowance is a form of remuneration provided by an employer to an employee for travel within India, be it during leave, post-retirement, or after service termination. Despite its seemingly straightforward nature, claiming an LTA exemption entails consideration of various factors, governed by provisions outlined in the Income Tax Act.
LTA Exemption Section 10(5):
The exemption is limited to the smaller of two amounts, either actual travel expenses or the cost of an economy class ticket.
Eligibility for LTA Claim:
Only individuals can claim LTA for themselves and their family members, including spouses, children, and dependent siblings and parents. Certain conditions must be met for claiming the exemption:
- Actual journey is mandatory for exemption eligibility.
- Only domestic travel within India qualifies for exemption; international travel is not covered.
- The exemption applies to the employee alone or with family, with 'family' encompassing specified relatives.
- Restrictions exist regarding the number of children eligible for exemption based on birth date.
Amount of LTA Exemption:
The exemption is applicable solely to actual travel costs incurred by the employee and limited to the LTA provided by the employer.
Exemption for Various Modes of Transport:
Exemption limits vary based on the mode of travel, considering factors such as airfare or rail fare.
Frequency of LTA Claim:
LTA exemption is permissible for two journeys within a block of four calendar years.
Block Year:
Distinct from the financial year, a block year is established by the government for LTA exemption purposes, spanning four years each.
Carryover of Unclaimed LTA:
Unused exemptions from preceding blocks can be carried over to the subsequent block, subject to certain conditions.
Procedure to Claim LTA:
The process for claiming LTA varies depending on the employer’s policy. Employees typically need to adhere to deadlines and may be required to submit proof of travel.
Multi-Destination Journeys:
Exemptions apply to travel costs from the origin to the farthest destination in the vacation, via the shortest available route.
LTA Exemption for Holiday Travel: Organizations may stipulate specific conditions for LTA claims, potentially rejecting claims for travel on official holidays or weekends.
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