Learn Everything About Leave Travel Allowance

Salaried individuals are eligible for multiple tax exemptions under the Income Tax Act, 1961, in addition to deductions for housing loan interest and LIC premiums. Exemptions shield some forms of income from all taxes, whereas deductions lower your overall taxable income. This enables firms to create a Cost to Company (CTC) package for an employee in a way that minimizes taxes.

One such legal exemption that is frequently utilized by employers and available to the salaried class is the Leave Travel Allowance (LTA)/Leave Travel Concession (LTC). For LTA received from a previous employer about travel after retirement or cessation of employment, there is also an LTA exemption. Within a four-year block, LTA can be claimed for any two of those years. 2022 to 2025 is the current block year for LTA claims.

What is Leave Travel Allowance (LTA)?

An employee may receive a Leave Travel Allowance from their company to travel to any location in India while on leave, after retirement, or following the end of their employment. Even though it seems straightforward, there are a lot of things to consider before filing for an LTA exemption.

Conditions for Claiming LTA

For travel expenses paid for themselves and their family (spouse, kids, parents, siblings who are totally or mostly dependent on them), only persons are eligible to submit an LTA claim.

• To be eligible for the exemption, the trip must really occur.
• Only internal travel - that is, travel inside India - is immune from this rule. Under LTA, no overseas travel is covered.
• The employee is eligible for the trip exemption either by himself or in the company of his family, which is defined as the employee's spouse, children, parents who are totally or mostly dependent on them, brothers, and sisters. 
• Furthermore, employees with more than two children born after October 1, 1998, are not eligible for this kind of exemption. Children born before October 1, 1998, are exempt from all limitations. Furthermore, this restriction does not apply to multiple births that occur on a subsequent occasion following the delivery of one kid.

Amount of LTA Exemption

The employee's actual travel expenses, such as their bus, rail, or airline fare, are the only ones for which the exemption is granted. This exemption does not apply to costs for local transportation, sightseeing, lodging, meals, etc. Additionally, only LTA given by the employer is exempt. For instance, only Rs 20,000 will be available as an exemption and the remaining Rs 10,000 will be included in taxable wage income if the company grants an LTA of Rs 30,000 but the employee actually pays Rs 20,000 in travel expenses.

Is it possible to claim an LTA exemption for every vacation?

No, only two trips may be taken within a four-year period to qualify for an LTA exemption.

• Block Year

A block year is determined by the government for LTA exemption purposes, and it differs from a financial year. Each of the four years is comprised. In 1986, the first 4-year block got underway. Block years 1986–1989, 1990–93, 1994–97, 1998–2001, 2002–05, 2006–09, 2010–13, and so forth are in the list. The calendar years 2018–21 are the block that applies to the current period. The years 2014–17 made up the prior block.

• Carryover of Unclaimed LTA

In case an employee has not availed exemption with respect to one or two journeys in any of the block of 4 years, he is allowed to carryover such exemption to the next block provided he avails this benefit, in the first calendar year of immediately succeeding block. 

How to File an LTA Claim

The process for submitting an LTA claim is often employer-specific. Each employer sets a deadline for employees to claim Labor Trouble Benefits (LTB) and may also demand that workers present documentation of their travel, such as airline tickets, boarding passes, travel agent invoices, etc., in addition to the required declaration. Even if it's not required, employees should always preserve copies of their evidence of travel for their records and provide it to the employer upon request, in accordance with the company's LTA policy, or to tax authorities.

Multi-Destination journey

Income tax provision provides exemption w.r.t travel cost incurred on leave to any place in India. Conditions pertaining to the mode of transport also refer to the place of ‘origin’ to the place of ‘destination’ and the route which must be the shortest available route. Hence, if an employee travels to different places in a single vacation, the exemption can only be availed for the travel cost eligible from the place of origin to the farthest place in the vacation by the shortest possible route.

LTA Exemption for Holiday Vacation

Many companies that adhere closely to the language of the income tax provision only permit workers to claim labor-related expenses (LTA) if they request time off and travel during that period. Travel on official holidays or weekends may result in the rejection of LTA claims by these organizations.

Conclusion

Employees must make sure they accurately record their travels, remember when submissions are due, and remain informed about any changes to the rules. Gaining an understanding of LTA opens up new travel options and possible tax savings.