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LTA or Leave Travel Allowance is such an allowance and is also called LTC or Leave Travel Concession. The LTA exemption in respect to your former employer remains applicable during travel after your retirement.

What is LTA allowance?

LTA allowance is a great tax-saving tool in the hands of the employee. The LTA full form is Leave Travel Allowance, also called LTC or Leave Travel Concession. The employer pays an allowance to the employee when he/she travels alone or with family when on leave/vacation and is a tax-free allowance. The exemption is available when proof of travel is produced to the employer who reimburses the same subject to the eligibility conditions for LTA.

LTA meaning, Leave Travel Allowance, is an allowance added to your basic pay and is provided by the employer to offset travel costs when travelling alone or with family for a vacation. It applies to within the country costs of travel.

The 1961 Income Tax read and Rule 2B and Section 10(5) define the meaning, tax exemption, and conditions laid out to claim LTA tax exemption. Let us look into these briefly.

The latest update makes LTA un-applicable to taxpayers under the new tax regime. Though it is well-known that Leave Travel Allowance is tax-exempt, there are some exemptions and limits on the allowance. Here’s a list of them.

Here’s a list of expenses that are exempt under the LTA rules.

Also Read: Conveyance Allowance- Definition, Limit, Exemption and Calculation

Employees are allowed to make two LTA claims in a 4-year block. The Income Tax Department notifies the block years, which are not necessarily in line with the Financial Year used for ITR or Income Tax Return filing. For example, the previous block of 4-years was from 2014 January 1st to 2017 December 31st  and the current one from 2018-2021. Hence you can claim two journeys undertaken during this block of 4-years for tax exemptions. However, suppose the employee has not travelled during this block of years. In that case, the LTC concession for tax-exemption can also be carried over to the next FY or financial year and not the block of 4-years. Note that all expenses for food, stay, shopping, sightseeing, etc., are not covered. It is only the ticket or travel fare that is considered for LTA exemption.

Each block decided by the Government for LTA exemption comprises 4 years. The first block began in 1986. Thus the block years are 1986-89, 1990-1993, 1994-1997, 1998-2001, 2002-2005, 2006-2009, 2010-2013 and so on. The current block now is 2018-21 and the previous one from 2014-2017.

Let us consider how LTC is treated. For example, Raj is entitled to an LTA amount of Rs 35,000. He has claimed an amount of Rs 20,000 in FY 2017 as his leave travel claim. The LTA deduction applicable in this case is only Rs 10,000, and Rs 15,000 gets added to his taxable income. LTA is paid only as per the claim and for the shortest route from origin to destination and back. Also, Raj is allowed only 2 claims for LTC for 2014 to 17 (which is the current block). If Raj does not prefer a claim, he can carry over the leave travel entitlement to the next FY. This claim is not to be considered in the next block of years. Here’s a chart that explains when you can carry it over.

The employers don’t need to submit travel proof of the employees to the tax authorities for claims and assessment of LTA. But they generally have the right to collect such documentary proof for reimbursements. Hence, you should keep travel proof such as flight tickets, boarding passes, travel agent invoices, on-duty passes, or documentary travel proof. At times, the assessing tax officer or company auditors may also scrutinize these proofs submitted by the employee.

The LTA in salary structure is not like other allowances and is not common in your take-home salary. Always check the pay structure before claiming LTA. The amount available to the employee can vary from one person to another. You need to have LTA eligibility, produce bills/ tickets, etc., as proof of travel to your employer.

The procedure followed to make an LTA claim is as follows.

To be eligible to claim LTA, you will need to travel and should have taken leave to travel. Your trip can be for travel in India only and without or with family members. The LTA rules specify that the LTA benefit is not an entitlement offered to all employees. Instead, it is dependent on factors like the employee’s pay scale, designation etc. The employer makes this entitlement to an employee based on his discretion and decides the LTA amount specified in the salary contract’s leave travel allowance section.

Leave Travel Concession or Allowance is an important part of your salary structure and is also a great saving tax tool under the Income Tax Act 1961.

Also Read: Dearness Allowance (DA)- Defination, Types & DA Calculation

To claim LTC or LTA, an employee has to submit to the employer

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