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

The full form of LTA stands for Leave Travel Allowance. LTA is given to employee to reimburse travel expenses, typically on a vacation. Section 10(5) of the Income Tax Act provides for exemption of LTA, on satisfaction of certain conditions. LTA exemption is also available for LTA received from former employer w.r.t travel after the retirement of service or termination of service. This exemption is not available under the new tax regime. 

Key Highlights

• Leave Travel Concession is an employee reimbursement for vacation expenses within India.
• Concept of block calendar year is important here. The current block year is 2022-2025.
• Exemption can be claimed for 2 years from the above 4 years.
• A taxpayer can claim deduction for expenses incurred for self and family.

What is Leave Travel Allowance (LTA)?

Under the provisions of Income Tax Act, Leave Travel Allowance/Leave Travel Concession is a type of allowance given by an employer to their employee for travelling to any place in India. It can be given either on leave, after retirement or after the termination of his service.

Who Can Claim LTA?

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

Eligible Expenses for LTA Exemption 

• For Air Travel: Economy class fare of Air India can be claimed as exemption
• For Travel by Rail: 1st class A/C fare is eligible for exemption
• Other Modes of Transport: If the railways do not exist for the journey route, 1st class A/C bus fare of recognized modes of transport can be claimed as an exemption.
• No Recognized modes of Transport:  1st class of the A/C rail for the same distance can be claimed as exemption.

If the actual expense incurred on travel is less than the above specified expenses, only the actual travel expenses can be claimed as exemption. Local conveyance, sightseeing, food and accommodation expenses cannot be claimed as exemption.

Note: The red arrow shows the lower of the two amounts will be exempted. For instance, if you travel by air, the exemption amount will be either your actual travel costs or the cost of an economy class ticket, whichever is lower. The journey should be taken through the shortest route to the destination.

Conditions for Claiming LTA

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

• Only domestic travel is considered for exemption, i.e., travel within India. No international travel is covered under LTA/LTC
• The exemption for travel is available for the employee alone or with his family. ‘Family’ includes 
  • Spouse
  • Children
  • Dependent parents
  • Brothers, and sisters of the employee.
• Further, such an exemption is not available for more than two children of an employee. If twins are born after first child, the restriction is not applicable. LTA can be claimed for all the three children.
• Valid Proof of travel is essential to claim the exemption.
• Exemption can be claimed only to the extent of allowance granted by the employer.
• The exemption is limited to certain class of tickets.

Concept of Block Year

LTA exemption is available for only two journeys performed in a block of four calendar years.

• A block year is different from a financial year and is decided by the Government for LTA exemption purposes. 
• It comprises 4 calendar years each.
• The block applicable for the current period is  2022-25. 

Carryover of Unclaimed LTA/LTC

• If the employee has not availed exemption for one or two journeys in any of the block of 4 years, he is allowed to carryover one such unavailed LTC exemption to the next block.
• The carried forward exemption should be availed in the first calendar year of the 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.

Leave Travel Allowance under New Tax Regime

There are various deductions are exemptions that are restricted under the new regime. LTA is one such deduction. Leave Travel Allowance is not available under the new tax regime. Therefore, you have to opt for old regime to claim exemption of leave travel allowance.

Multi-Destination Journey

• As per the provisions of the act, computation of LTA exemption is given only to the extent of ‘Shortest route from the origin to destination’.
• So, if the journey has 2 or 3 destinations, the shortest distance from starting point to the farthest destination only will be considered. Whole of the travel expenses cannot be claimed.

LTA Exemption for Vacation on Holidays

Many organizations 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 organizations may reject LTA claims for travel on official holidays or weekends.