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Know Leave Travel Allowance Rules & Exemption

Updated on May 31, 2023 , 8932 views

Leave Travel Allowance (LTA) is one of the best tax-saving tools that an employee can avail. The amount paid as LTA is tax-free, which is paid to the employee by the employer for travelling purpose. Let’s understand the concept of Leave Travel Allowance.

Leave Travel Allowance

Leave Travel Allowance Exemption

Well, the LTA is exempted from tax and the exemption is restricted only to the travel cost incurred by the employee. The tax exemption is not valid for the costs incurred during the entire trip such as dining, shopping and other expenses. Also, it is not exempted for more than two children of the individual born after 1st October 1998.

The Leave Travel Allowance is only allowed for two travels within a block of four years. In case, an individual doesn’t take advantage of the exemption, then you can carry forward it to the next block.

Check the list of expenses that is exempted under Leave Travel Allowance:

  • Air Travel- Economic airfare by the shortest route or amount spent will be exempted on whichever is lesser
  • Rail Travel- A.C first-class fare by the shortest route or the amount spent on travel whichever is lesser
  • Place of origin and destination place of journey connected by rail, but itinerary done by other modes of transport
  • Place of origin and destination not connected by rail (partly/fully), but connected by other public transport systems
  • Place of origin and destination not connected by rail or by public transport

Documents for Leave Travel Allowance

Usually, employers don’t have to submit the proof of travel to the tax authorities. Even though it is not considered obligatory for the employers to collect the proof of travel from the employees. But they still have the right to demand for the proof, if needed. The employee is advised to keep proof of travel such as flight ticket, invoice of the travel agent, duty pass and other proof in case the assessing officer demand for it.

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Calculation of Leave Travel Allowance

As said earlier, an employee can make Leave Travel Allowance for two journeys in a block of four years. These block years are different from financial years and it is created by the income tax Department. In case, an employee fails to make any claims, then the exemption gets moved to the next year, but not to the next block. Only travel and ticket fare are considered as an exemption.

How to Claim LTA?

LTA is not a part of the salary structure. Before you claim the LTA you need to check your pay structure. The LTA amount can differ from each other. In case you are eligible for LTA you need to give tickets and bills to the employer.

Every company will formally announce the dates for LTA claims, then you have to fill the forms and attach the documents such as travel tickets or receipts.

Applicable LTA Deductions

LTA deductions are based on salary structure and it is exempted only to a certain extent. The LTA can be claimed under the following circumstances.

  • Air Travel- The exemption is allowed of tickets fares of a national airline’s Economy class
  • Rail Travel- The exemption is allowed for AC first-class tickets
  • Travel by other modes of transport- If the destination is not connected by air or rail, then an amount equivalent to first-class, AC first-class fare whichever is lower can be exempted under LTA

The LTA is only considered on the shortest route. If an employee is entitled to an LTA amount Rs. 30,000, but an individual can only claim for Rs. 20,000. The remaining Rs. 10,000 will be added to your Income which is accountable for the Tax Liability.

Travel Limitations

The below pointers are the travel limitations applicable under the Leave Travel Allowance:

  • Leave Travel Allowance only covers only domestic travel, you cannot claim an exemption for international travel
  • An individual should travel by either air travel, railway or public transport

LTA Eligibility

LTA is not entitled to all employees, it is based on various factors such as grade, pay-scale etc. It is provided to travel within India where it is a round trip with or without family members.

All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.
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