Everything about Leave Travel Allowance Explained

The Tax Exemption is a statutory rule that allows monetary exclusion or reduction of the total taxable income. One such exemption available and utilised by employees is Leave Travel Allowance.

Curious to know about Leave Travel Allowance? Read along!

What Is a Leave Travel Allowance?

leave allowance travel — (source: indiatimes)

Leave Travel Allowance refers to a kind of allowance that employers provide to employees for travel. This allowance covers domestic travel costs when employees are on leave from work.

Now that individuals know what is LTA in salary, let’s focus on the exemption for FY2021, a list of expenses exempted under LTA and other details.

When Can You Claim Leave Travel Allowance?

Leave Travel Allowance is not a usual component of the salary structure. Hence, before claiming Leave Travel Allowance, individuals must check the pay structure.

The Leave Travel Allowance provided by employers may vary from one to another. Eligible individuals can claim LTA by submitting required documents to employers.

All companies announce a particular claiming date for Leave Travel Allowance where individuals have to fill up a form, attach essential documents and send it to the Accounts or Human Resource Team.

Remember, employees need to claim for Leave Travel Allowance before employers start calculating tax liability.

Wondering what the proofs are essential for LTA? Read along!

Documents Required to Claim LTA

To claim Leave Travel Allowance, individuals have to submit proof of travel such as:

Flight tickets
Boarding pass
Duty pass
Bills from travel agent
Other documents demanded by an employer or evaluating officer.

How to Calculate Leave Travel Allowance?

Computing Leave Travel Allowance is simple. The LTA is exempted to a certain limit while assessing income from salaries. The remaining amount is taxable according to the Income tax slab.

Let’s take a brief example to understand.

Suppose Mr. Ashok received an LTA of ₹4,500. He is eligible to claim around ₹3,500 as an exemption against that amount as he spent that in travel. So, the calculation is as follows:

Particulars	Amount
LTA received	₹4,500
Expenses in travel	₹3,500
Exemption limit (applicable only against expenses for travelling)	₹3,500
Taxable LTA added to the salary	₹1,000

Things to Know Before Calculating Leave Travel Allowance

One can easily calculate Leave Travel Allowance. However, they must know certain things before doing it.

As stated earlier, employees can claim LTA for two travels in a block of 4 years. There is a difference between financial years and block years, and the Income Tax Department decides the latter.

The current block year is between 1st January 2018 and 31st December 2021. Here, employees can claim for two journeys that happened between 2018 and 2021.

However, if employees have not placed any claims during these block years, they can move the allowance in the next block years but not in the following next block.

Remember, only travel costs are permissible for LTA, not food or other costs.

Which Expenses Are Exempted under Leave Travel Allowance?

The Income Tax Section 10(5) and Rule 2B covers tax exemption and other details related to tax exemption.

Below is a list of expenses that are allowed as exemption under LTA:

Travel by Air- The airfare of economy class by the shortest route or the actual expense incurred by an employee (whichever is lesser) is available for tax exemption.
Travel by Rail- The rail fare of AC 1st class by the shortest route or the actual expense by an employee (whichever is lesser) is available for tax exemption.

Besides, there are other situations that are covered under the exemption list of Leave Travel Allowance . These are as follows:

In case the place of origin and destination are not linked by rail, but the journey is continued by other modes of transport.
In case the place of origin and destination are not linked by rail (partly or fully) and not connected by other known Public Transport systems (PTs).
In case the place of origin and destination are not linked by rail (partly or fully) but are connected by other known PTs.

In an earlier section, we have focused on a list of LTA exemptions. Now, let’s check some of its particulars, i.e. applicable deductions. Read along!

What Are the Deductions Available for Leave Travel Allowance?

On the basis of salary structure, employees can claim a certain exemption limit in LTA. The following conditions come under LTA exemption:

While travelling by air, employees can claim an exemption for ticket costs only of a national airline’s economy class.
When travelling by train, employees can claim an exemption for AC 1st class tickets.
While travelling by other modes of transportation (except air or railway), employees can claim exemption. Here, exemptions are available for the charges that are the same as first-class, AC 1st class or deluxe and for the lesser amount among the given options.
The LTA deductions are applicable only for the journey of the shortest tour i.e. place of and return. Here, if a salaried employee receives ₹ 30,000, he/she can claim for only ₹ 20,000. The remaining ₹ 10,000 will be considered income and will be taxed as per the applicable tax slab rates.

What Are the Restrictions on Leave Travel Allowance?

Following is a list of conditions under which tax exemption is not available while availing Leave Travel Allowance.

LTA is not available on food expenses incurred while travelling .
International travel is not permissible for exemption.
Exemption under LTA is not offered to salaried employees who have more than two children and who are born after October 1, 1998.
Salaried individuals cannot claim to Leave Travel Allowance more than two times in a block of 4 years.

Note: If salaried individuals have not claimed Leave Travel Allowance in a specific block year, they can carry it forward to the next block and use it in the first year of the next block itself.

Read the above-mentioned details carefully and understand Leave Travel Allowance to enjoy the benefits offered under it. But remember, this allowance is not applicable for employees who wish to follow the new tax regime.

Frequently Asked Questions

✓ What is the eligibility to claim Leave Travel Allowance?

To avail Leave Travel Allowance, employees have to take leave and travel within the country where it has to be a round-trip.

✓ Is Leave Travel Allowance part of Income Tax Filing?

Leave Travel Allowance is not part of Income Tax Filing. Employers certify employees LTA claims and add them to Form 16.