Leave Travel Allowance (LTA) is the allowance that is given to the employee to the employer whenever they go on vacation. The employees just need to submit the bills to claim Leave Travel Allowance (LTA).
The amount of LTA that is given to the employees is different from employees to employees working position in the company.
Leave Travel Allowance can also be referred to as Leave travel concession (LTC). In Union Budget 2020 no changes have been made on Leave Travel Allowance (LTA).
List of expenses that are exempted under Leave Travel Allowance
- Travel by Air – Economic exemption will be given based on the shortest route or the amount spent.
- Travel by Rail – A.C. first-class fare by the shortest route or the amount spent on travel will be exempted depending on whichever is lesser.
- Other modes of transport.
- Origin and destination of travel connected by rail but travel by another mode of transport.
- Place of origin & destination not connected by rail(partly/fully) but connected by other recognized Public transport system.
- Place of origin and destination not connected by rail (partially /fully) and also by other recognized public transport system.
Also, read | Standard Deduction (SD)
How to Claim Leave Travel Allowance (LTA)
- Leave Travel Allowance (LTA) is not a basic salary structure.
- If someone wants to claim LTA they need to first check their pay structure.
- LTA allowances differ for employees to employees depending on their job position in the company.
- An individual needs to show bills of the hotels, etc, or tickets to their employer (boss) to claim LTA.
- The company will tell the Leave Travel Allowance (LTA) date, you just need to fill the form and attach the specific detailed documents such as Tickets, Bills, boarding passes, etc.
- The employee will be required to claim an LTA from an employer before making the final calculation for the tax liability.
LTA Rules for Exemption Under Section 10(5)
- One can travel to any place in India. No international trips are considered.
- LTA exemption is not allowed if it is encoded by the employee without going on any trip.
- The whole LTA amount is charged to tax.
- The family of the employee can also take a tour without the employee and still claim an exemption under section 10(5).
- Here’s family means the employee’s spouse, two children, and the employee’s fully dependent parents or siblings.
- Exemptions are available for travel while in service or after termination or retirement from service.
- The cost of the trip is taken into consideration only for the exemption. No other amounts are qualified for the deduction.
Tax Rebate on Leave Travel Allowance (LTA)
- In instances where you are not able to claim LTA within the year, you can transfer it to the next year.
- However, the LTA exemption is not part of the income tax return filing.
- Your employer will certify your LTA claim and add it to Form 16.
Leave Travel Allowance (LTA) Restrictions
- LTA is available only for leave allowances.
- The employee claiming LTA can only travel within India.
- The employee has to maintain proof to claim LTA and also for tax auditing purposes.
- It can only be claimed only by after 4 years.
- If LTA is not claimed in a particular block, it can be moved to the next block and used in the first year of the following year.
- The LTA exemption also provides cover for the individual’s family. A family under LTA includes immediate families which are parents, siblings, spouse, and children.
Travel Limitations Under LTA
- Leave Travel Allowance covers only domestic travel it doesn’t cover international traveling.
- The mode of travel should be air travel, railway or public mode of transport.
- Based on various factors such as grade, pay-scale, etc. LTA benefits are not entitled to all employees.
- An employer decides whether a certain amount of LTA can be allocated.
- To be eligible for LTA, the employee must take leave and travel.
- LTA is provided for travel within India where it is a round trip with or without family members.
Benefits of Leave Travel Allowance
- LTA helps in saving tax.
- The employee can make their tickets for travel through air or train and other means of transport and save from taxable income.
- LTA can be claimed if you want to travel alone or with family members.
- LTA includes travel expenses for family members – parents, siblings, spouse, and children.
FAQ’s Related to Leave Travel Allowance
- What exactly does LTA cover?
LTA covers only the expense incurred during the travel.
- Who does it offer cover for?
It covers the travel expenses sustained by the employee and their family. Relatives aren’t considered family under Leave Travel Allowance.
- How numerous times can an employee claim Leave Travel Allowance?
One can make a claim only twice during a block of 4 years.
- Is international travel permitted under Leave Travel Allowance?
No, international travel is not covered.
- Can LTA be carried forward?
LTA is often carried forward to subsequent blocks if it’s not utilized for the present block.
- I travel all around India in October 2020, what block does this fall under? When am I able to claim this under LTA?
October 2017 falls under the previous block and you ought to have claimed within the financial year 2017-18 (April 2017 to March 2018)
- Current LTA Block?
The current block period of 4 years is from 1 January 2018 until 31 December 2021.
- If I took a leave in my previous job and didn’t claim any LTA, am I able to still claim it with my current employer?
Most employers in India don’t allow you to claim LTA from previous employers. They expect you to claim it when it occurs.
- What is the LTA limit? Is there a fixed equation for this such as x % of basic pay?
There is no limit as per Income tax law under section 10 (5) rule (2b).
- Is leave LTA paid monthly?
Employers pay LTA as part of the CTC salary just like HRA and medical allowance. LTA for every employee is calculated per annum. However, employees may even receive it as a part of their monthly payments.