Leave Travel Allowance (LTA) is a special allowance that is paid to employees by the employer for taking vacations. (Leave Travel Allowance is also known as Leave Travel Concession or Leave Travel Assistance). LTA is meant for traveling and you are expected to utilize it to spend it for tourism-related travel expenses.
The LTA / LTC that you receive from your employer for self and family in connection with your proceeding on leave to any place in India is fully exempt from income tax, provided it satisfies certain conditions.
The amount of exemption depends upon the mode of journey. This exemption is available in respect of 2 journeys undertaken in a block of four calendar years and both husband and wife are eligible for LTA provided both spouses are not claiming LTA exemption for the same journey. The conditions to get LTA fully exempt are as follows:
â€¢ The amount is actually spent on travel â€“ Without performing any journey and incurring expenses thereon, no exemption can be claimed. So, you have to actually spend this amount on transportation. The amount can be spend for you or your family members ( it includes spouse, children and dependent parents, brothers and sisters) but you must be traveling with your family;
â€¢ The amount has to be spent on fare â€“ Exemption is limited to expenses on air fare, rail fare, bus fair only. Accordingly, no other expenses like taxi charges, lodging/boarding expenses, food related expenses etc. are eligible for LTA;
â€¢ Travel within India â€“ No exemption is available for foreign travel;
â€¢ Shortest Route should be selected â€“ You must take the shortest route to your destination to be eligible for LTA.
â€¢ Proof of travel – Proof of travel needs to be preserved and presented to claim this exemption like tickets, receipt from the travel agency or car rental agency etc;
â€¢ LTA / LTC tax exemption can be claimed only twice in a block of 4 years â€“ Though you can claim two journeys in a block of four years, you can claim the LTA benefit just once in a year. You cannot claim both the journeys in one year.
One should also keep in mind the following points:
â€¢ LTA is not related to when you started your employment. The government fixes blocks of years. These blocks are not financial years (April 1 to March 31); they are calendar years (January 1 to December 31). The current block is 2010-13 — January 2010 to December 2013. During this time period, a person is entitled to two LTA claims.
â€¢ You can carry forward your LTA. One LTA can be brought forward and claimed in the first year of the next block.
â€¢ If you switch jobs, you can get the LTA not only from your present organization but also from your former employer, if the concession is lying unutilized.
Thus to conclude – Claim Leave Travel Allowances on Travel expenses and Save Taxes