Leave Travel Allowance
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
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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.
Leave Travel Allowance - FAQs
Q1. How much of my Leave Travel Allowance (LTA) may I say tax-free?
The LTA exemption number is determined by the LTA portion of your benefit plan or CTC. You will argue up to the sum specified in your CTC if you have evidence of travel during the block time.
Q2. What payments are eligible for LTA?
The tax incentives are only applicable on direct travel costs paid on train, bus, or air tickets, and only if the above provisions are met.
Air Travel: Tax exemption can be asserted on the economy class airfare of the national carrier (Air India) by the shortest route or the real cost incurred, whichever is less.
Train Travel: If the origin and destination locations are linked by rail and the trip is completed by some means of transportation other than air, the First Class AC rail fare or the actual amount spent, whichever is less, will be stated for tax exemption.
Q3. What are the types of travelling allowance forms?
They are – Transfer TA claim form, Transfer TA form, and Travel Allowance tour claim.
Q4. What is a leave travel allowance?
Leave Travel Allowance (LTA) 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.
Q5. Is it appropriate to submit the employer travel expense bills?
While the Income Tax Act does not require employers to obtain evidence of expenditures reported for LTA tax cuts, it is a good idea to have those bills on hand in case the tax authorities ask for them. As a result, while such bills of expenditures are not required to be sent to the contractor, the tax authority may claim them by issuing a notice.
