LTA full form is Leave Travel Allowance and it is a form of stipend given by an employer to an employee who is on leave from work to fund his or her travel expenses. LTA is an integral part of an employee’s compensation and it is deductible from payroll tax under the Income Tax Act of 1961.
The LTA collected by the employee is not included in his net income for the year under Section 10(5) of the Income Tax Act.
LTA Exemption Section
The employee’s travel expenses are the only ones covered by the exemption. The tax exemption would not apply to expenditures accrued during the whole journey, which may include things like meals, shopping, and other expenses. More than two children of a parent born after October 1, 1998, are not eligible for the exemption.
Just two trips within four years are allowed to be exempt. The latest block spans the years 2014 to 2017. The exception will be carried over to the next block if the user does not use it during this block.
Expenses exempted under LTA Allowance
- Travel by plane: The cheapest airfare using the shortest route or the amount paid, whichever is less, would be omitted.
- Travel by rail: A.C. first-class fare from the shortest path or the amount expended on travel, whichever is less, would be removed.
- The origin and destination points of the journey are linked by train, but the journey is completed by another means of transportation.
- The origin and destination locations are not linked by rail (partly or completely) but are connected by another recognized public transportation system.
- The origin and destination locations are not linked by rail (partly or completely) but are connected by another recognized public transportation system.
Also, read about Special Allowances
| Advantages of LTA: |
- The origin and destination places are not (partially or completely) connected by rail, but are instead connected by another recognized public transit system.
- The origin and destination locations are not (partially or completely) linked by train, but rather by another well-known public transportation system.
- The origin and destination locations are linked (partially or completely) by another well-known public transit system, rather than by rail.
- These benefits can be for solo and family travel.
- The family members’ allowance is also covered.
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| Eligibility: |
- Only real travel costs are eligible for LTA. Under the LTA, all modes of transportation, such as land, train, and air, are claimable. To assert the leave travel allowance, the employee must request clear proof of expense.
- Only travel expenses are eligible for LTA. Food, lodging, or all other costs not related to travel are not included.
- Only domestic travel costs are eligible for LTA. You cannot say LTA for the costs borne by the employee during his or her overseas travel (if any).
- Employees are not eligible for LTA in any fiscal year. Just two journeys in four years are eligible for LTA. The government determines the block years for LTA purposes.
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How to Claim LTA?
The process for claiming LTA varies by employer. Any employer sets a deadline for workers to claim LTA and may ask employees to request evidence of travel, such as tickets, boarding passes, or invoices from travel agents, in addition to the required declaration.
While it is not required of employers to obtain proof of travel, it is often a good idea for workers to retain copies for their records and to report to their employers depending on the company’s LTA policy or to tax authorities on request.
Is it possible to assert the LTA exemption on every vacation?
No, an LTA exemption is only valid for two journeys over four calendar years.
Also, read about House Rent Allowance
Block Year
A block year differs from a fiscal year in that it is determined by the government for LTA exemption. It is divided into four years. The first four-year block began in 1986. 1986-1989, 1990-93, 1994-97, 1998-2001, 2002-05, 2006-09, 2010-13, and so on are examples of block years. The calendar year 2018-21 is the block that applies for the present year. The calendar year 2014-17 was the previous block.
Carryover of Unclaimed LTA
If an employee has not taken advantage of the exemption for one or two journeys in any of the four-year blocks, he will transfer it over to the next block if he takes advantage of the gain in the first calendar year of the next block.
LTA Restrictions
When it comes to Leave Travel Allowance, there are some limitations. The significant constraints on Leave Travel Allowance are shown below.
- The Leave Travel Allowance only applies to travel expenditures.
- The individual can only travel with India.
- Proof of travel must be kept by the individual as it may be required for tax auditing purposes.
- More than two children born after October 1, 1998, are not eligible for the Leave Travel Allowance exemption.
- LTA can only be claimed twice in a four-year period.
- If LTA is not claimed in a specific block, it may be carried over to the next block and used in the first year of the next block.
- The LTA exemption also covers the individual’s family. Under LTA, a family includes immediate family members such as parents, siblings, spouse, and children.
Benefits of LTA
- Leave Travel Allowance (LTA) is an important component of the wage structure that aids in tax savings.
- LTA can only be claimed for travel fare or tickets within India; expenses for lodging or any other fee are not eligible for exemption.
- An employee can save on taxable income by producing travel-related bills for a trip by air, train, bus, or any other means of transportation.
- The employer adds LTA to the income structure based on several parameters such as title, position, pay scale, and so on.
- LTA benefits are only available if they are included in the pay structure.
- You can make a claim for the LTA whether you travelled alone or with family.
- LTA pays travel expenditures for family members, including parents, siblings, spouses, and children, if you travelled with them on those occasions.