Leave Travel Allowance (LTA) - Rules, How to Claim, Eligibility, Tax Exemption and Latest Updates

The Income Tax Act, 1961 provides various exemptions to the salaried class apart from deductions such as LIC premiums, housing loan interest, etc. While the deduction is something reduced from a total taxable income, exemption means exclusion from total taxable income. Such exemptions enable the employers to structure Cost to Company (CTC) of employees tax-efficiently. 

One such exemption available to the salaried class under the law and widely used by employers is Leave Travel Allowance (LTA)/Leave Travel Concession (LTC). LTA exemption is also available for LTA received from former employer w.r.t travel after the retirement of service or termination of service.

Latest Update
The tax exemption of leave travel allowance is not available in case you choose the new tax regime.

What is Leave Travel Allowance (LTA)?

Leave Travel Allowance is a type of allowance given by an employer to their employee for travelling to any place in India: either on leave, after retirement or after the termination of his service.
Though it sounds simple, many factors need to be kept in mind before you plan to claim an LTA exemption. Income tax provision has laid down rules for claiming exemption of LTA which are provided below.

Who can claim LTA?

Only individuals can claim LTA for travel costs incurred for themselves and their family (Spouse, children, wholly or mainly dependent siblings, parents)

Conditions for Claiming LTA

Let us understand the conditions/requirements for claiming the exemption:

• Actual journey is a must to claim the exemption
• Only domestic travel is considered for exemption, i.e., travel within India. No international travel is covered under LTA
• The exemption for travel is available for the employee alone or with his family, where ‘family’ includes the employee’s spouse, children and wholly or mainly dependent parents, brothers, and sisters of the employee. 
• Further, such an exemption is not available for more than two children of an employee born after 1 October 1998. Children born before 1 October 1998 do not have any restrictions. Further, in cases of multiple births on a second occasion after having one child is also not affected by this restriction.

Amount of LTA Exemption

The exemption is available only on the actual travel costs i.e., the air, rail or bus fare incurred by the employee. No expenses such as local conveyance, sightseeing, hotel accommodation, food, etc., are eligible for this exemption. The exemption is also limited to LTA provided by the employer.

For example, if LTA granted by the employer is Rs 30,000, and the actual travel cost incurred by the employee is Rs 20,000, then only Rs 20,000 will be available as an exemption and the balance of Rs 10,000 would be included in taxable salary income.

Exemption w.r.t various modes of transport

Can LTA exemption be claimed on every vacation?

No, an LTA exemption is available for only two journeys performed in a block of four calendar years.

Block Year

A block year is different from a financial year and is decided by the Government for LTA exemption purposes. It comprises 4 years each. The very first 4-year block commenced in 1986. The list of block years is 1986-1989, 1990-93, 1994-97, 1998-2001, 2002-05, 2006-09, 2010-13 and so on. The block applicable for the current period is the calendar year 2018-21. The previous block was the calendar year 2014-17.

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. 

Consider the below example for a better understanding:

• Where carry over exemption is claimed in the first calendar year of the immediately succeeding block

• Where carry over exemption is not claimed in the first calendar year of the immediately succeeding block

Procedure to Claim LTA

The procedure to claim LTA is generally employer specific. Every employer announces the due date within which LTA can be claimed by the employees and may require employees to submit proof of travel such as tickets, boarding pass, invoice provided by travel agent etc., along with the mandatory declaration. Though it is not mandatory for employers to collect proof of travel, it is always advisable for employees to keep copies for his/her records and also to submit them to the employer based on the LTA policy of the company/to tax authorities on demand.

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 Vacation on Holidays

Many organisations that go strictly by the wordings of the income tax provision are allowing employees to claim LTA only if the employee applies for leaves and travel during that time. Such organisations may reject LTA claims for travel on official holidays or weekends.

Frequently Asked Questions

How much can I claim tax exemption in Leave Travel Allowance or LTA?

The amount of LTA exemption depends on the LTA component in your compensation package or CTC. You can furnish proof of travel within the block period and claim up to the amount prescribed in your CTC.

What is the latest block period to claim LTA exemption?

The latest block period of four years is from 1 January 2018 until 31 December 2021.

How many trips can I make in one year to claim the exemption?

You can claim LTA exemption only for one trip in one calendar year.

Can I claim LTA benefit for the travel costs of my family?

You can claim LTA benefit for the travel costs of yourself and your family consisting of your spouse, children, dependent parents, brothers, and sisters of the employee.

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