Leave Travel Allowance Meaning
Leave Travel allowance is the second most common allowance after House Rent Allowance. Same as HRA it is also an important component of CTC because of the tax benefits associated with it.
Section 10(5) of the Income Tax Act, 1961, read with rule 2B, provides exemption and outlines the rules for claiming LTA Exemption.
LTA Conditions and Rules
1. When you can claim LTA?
Two Conditions must be fulfilled to claim LTA:
- You must have taken leave from your company
- You must actually make a journey.
No limit of the minimum or maximum number of days of leave is prescribed in the act for a person to become eligible to claim LTA.
2. What Expenses does LTA Covers?
LTA covers only travelling expenses i.e. air ticket, bus ticket etc. It does not cover supplementary transportation cost like taxi fare, auto fare etc. One also cannot claim food expenses, shopping, hotel bills etc.
3. Whom does LTA Covers?
LTA covers you as well as dependent persons. Here dependent person includes
- Children (Maximum of 2, born after 1-10-1998 and should be dependent)
- Siblings (dependent sisters and brothers)
Do remember that you (assessee) should be present in the travelling group, in simple words you cannot claim LTA when you stay at home and your family goes for vacation.
4. How often LTA can be claimed?
LTA can be claimed Twice in a block of Four Calendar (not financial years) Years. You can also claim both the exemptions in a single calendar year.
|Block No.||LTA Block Years|
The block does not start with the start of your employment, The Government declares the block.
Current block is 2009-2013 (everyone must have availed it). The next block would be 2014-2017. Since it is calendar year not financial year, it will start from 1st January, 2014 to 31st December, 2017.
5. Modes of transport and maximum amount allowed under LTA?
However, you should keep the proof of travel as it may be needed by your employer. You can even submit the bills issued by the car rental company if you rent a vehicle.
6. Does LTA cover International Travel?
No, LTA is only permitted for domestic travel.
7. What is the Maximum Limit of LTA Exemption?
LTA is capped to a limit of amount provided by employer as a part of the CTC. One cannot claim more than the actual amount of LTA provided.
In case you have incurred more than LTA provided by your employer, the excess amount will not give you any tax benefits. Similarly in case you have spent less than your LTA amount, the remaining amount will not give you any tax benefits.
For example: If my LTA is Rs.25,000 this year but I have spent Rs.30,000 then Rs.5000 will not be eligible for exemption or if I spent only Rs.15,000 than exemption would be restricted to Rs.15,000.
8. How to claim LTA exemption?
Proof of expenses is required to be submitted to the employer, so they can include it in your form 16.
9. Can Husband and wife both claim LTA for same journey?
No, Husband and Wife cannot claim LTA for the same journey. They can claim exemption of LTA from their employers but for different journey.
So in total a couple can avail 4 LTA in a block of four years, if both are employed under different employer.
10. Can LTA be carried forward?
In case you are not able to claim exemption of LTA or have claimed only 1 exemption in a particular block, you can carry forward only 1 exemption to the first year of next block.
For example: If I have claimed only one exemption in the block of 2009-2013, now I am eligible to carry forward unused exemption to the first year of next block i.e. I can use this exemption only in the year 2014. The two exemptions of the block 2014-2017 would remain intact.
11. Is LTA taxed or how does LTA affects my tax liability?
LTA can be received either as a reimbursement or allowance.
In case you receive LTA as reimbursement than nothing becomes taxable. Suppose you are eligible to take LTA of Rs.30000 but you produce proof of Rs.20000, then you can claim exemption of Rs.20000.
In case of receiving LTA as an allowance, the unused amount will become taxable. Suppose your company offers LTA of Rs.30000 but you have spent only Rs.20000 then unspent RS.10000 will be added in your salary and become taxable.
The amount received as LTA/LTC is taxed as follows:
LTA/LTC Received xxx
(Less) LTA/LTC Exempted (xxx)
Taxable Amount xxx
The taxable amount is included in the salary and taxed according to the tax slab rate.