Leave Travel Allowance – Claim Exemption

Vacation and Travelling with family is of great enjoyment and fun and this can be more enjoyed if related travel expenses help to save tax. Leave Travel Allowance (LTA) is the only allowance provided by the employer to be off from work and take vacation. Value of leave travel allowance or concession or assistance is exempt from tax provided certain conditions are fulfilled:

Who can avail this exemption?

Every employee who receives LTA from employer for leave taken by self and family can claim LTA exemption.

Expenses Eligible – Only Fare expenses

Exemption is limited to the travel cost i.e., expenses on air fare, rail fare, bus fair only. No other expenses like taxi charges, lodging/boarding expenses, food related expenses etc. qualify for LTA exemption.

Exemption in respect of Shortest Distance

The exemption is limited to the amount admissible by the shortest route, depending on the mode of travel.

  • Travel by Fair – The economy class air fare to the destination by the shortest route.
  • Travel by rail or road – The air conditioned first class (AC I Class) rail fare to the destination by the shortest route.

Quantum of exemption

Exemption is limited to the actual expenses incurred on the journey. So, no exemption can be claimed without performing any journey and incurring expenses thereon.

For example, if an employee is receiving LTA of Rs. 50,000 but travel cost incurred of Rs. 40,000 only, then the exemption is limited to Rs. 40,000 and the remaining amount of Rs. 10,000 will be taxable.

Place of Travel

Exemption is available only for travel within India. No exemption is available for foreign travel.

Family includes

‘Family’, for the purpose of LTA exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on the individual.

The exemption shall not be available to more than two children of an individual born after October 01, 1998. However, this restriction does not apply in respect of children born before this date.

Proof of travel

Proof of travel needs to be preserved and presented to claim this exemption like tickets, receipts from travel agency etc.

In Block of 4 years – Only 2 journeys is exempt

Exemption can be claimed only for 2 journeys in a block of 4 calendar years, but one can claim the LTA benefit just once in a year. One cannot claim both the journeys in one year.

The current block is January 1, 2010 to December 31, 2013.

“Carry-over” exemption

If LTA exemption has not been claimed during any of the specified 4 year block periods or only one year it is claimed then it can be brought forward and claimed in the first year of the next block.

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