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ToggleAre you longing for a much-needed getaway while also trying to figure out how to reduce your tax burden? Look nowhere else! Your travel wishes can come true with LTA, also referred to as Leave Travel Allowance. Employers provide their staff with this wonderful tax benefit, which enables them to pay less in taxes for domestic travel expenses. Excited? Let’s delve into the LTA world, how it functions, and the laws that control it. So without waiting further, let’s dive in!
Leave Travel Allowance (LTA) is a special allowance provided by employers to their employees when they take leave to cover their travel expenses. It’s a significant component of your salary as it qualifies for income tax exemption under the Income Tax Act of 1961. According to Section 10(5) of the Income Tax Act, the LTA received by you won’t be considered as part of your taxable income for the year.
To avail of the LTA exemption, you can claim it only for the actual travel costs like airfare, rail fare, or bus fare incurred during your journey. However, expenses for local conveyance, sightseeing, accommodation, and food are not eligible for this exemption. Keep in mind that the exemption is limited to the LTA provided by your employer.
For instance, if your employer grants you an LTA of Rs. 30,000, but you actually spend Rs. 20,000 on eligible travel costs, the exemption will be applicable only to the extent of Rs. 20,000. The remaining Rs. 10,000 would be included in your taxable salary income.
To claim your Leave Travel Allowance, there are some important conditions to meet:
To claim your Leave Travel Allowance, you’ll need to provide proof of travel, such as:
No | Scenario | Eligible Exemption |
1 | Travel between non-connected journeys and destinations by recognized public transport | Reimbursement is equivalent to air-conditioned first-class rail fare for the shortest route as if taken by train. |
2 | Travel between non-connected journeys and destinations, with partial/full rail connection | Reimbursement is restricted to 1st class or deluxe-class fare for the shortest route to the destination. |
3 | Travel between journey and destination connected by rail | Reimbursement for any other mode of transport, limited to air-conditioned first-class rail fare for the shortest route to the destination. |
4 | Air travel between journey and destination | Reimbursement is limited to the air economy fare of the national carrier (for example Air India) for the shortest route to the destination. |
Computing your Leave Travel Allowance is easy! The LTA is exempted up to a certain limit while calculating your income from salaries. The outstanding balance will be subject to taxation based on your applicable Income Tax bracket.
For example, if you received an LTA of ₹6,500 and you spent ₹5,500 on eligible travel expenses, you can claim an exemption of ₹5,500. The remaining ₹1,000 would be added to your taxable salary.
There are some conditions under which tax exemption is not available for Leave Travel Allowance:
Note: If you haven’t claimed LTA in a specific block year, you can carry it forward to the next block and use it in the first year of the next block.
The LTA percentage is determined based on your salary package or the cost to the company. Typically, it falls within the range of up to 15% of your taxable income.
As LTA is a part of your overall salary structure, most employers usually include it in your take-home salary. However, it’s advisable to reach out to your HR department for a more precise clarification.
When undertaking a journey with multiple destinations, you can claim the tax exemption only for eligible expenses incurred on the shortest route available from your place of origin to the farthest point of your journey.
Now that you’ve understood the ins and outs of leave travel allowance, get ready to enjoy the benefits it offers! Just remember, this allowance may not be applicable if you choose to follow the new tax regime. Happy travels!
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