What is Leave Travel Allowance (LTA)?

Salaried employees of certain organisations are often provided with a range of different allowances and perks. One of the many allowances that employees are entitled to is the leave travel allowance. This particular perk is offered specifically to cover the domestic travel expenses of employees and is also exempt from Income Tax to a certain extent. 

If you’re a salaried employee who is entitled to leave travel allowance, continue reading to get to know everything about this unique perk, the eligibility criteria for claiming it and its various benefits, among others. 

What is Leave Travel Allowance (LTA)?

Leave travel allowance or LTA, is one of the many allowances that organisations provide to their salaried employees. Also referred to as Leave Travel Concession (LTC), employers offer this benefit to cover the travel expenses that their employees incur outside of work. In addition to claiming LTA for the travel costs they incurred, eligible employees can also claim the travel expenses incurred by their families. 

The LTA scheme was first introduced by the government of India in 1986 for employees working in the public sector and various governmental organisations. However, realising the benefits of the scheme, it was later extended to private-sector salaried employees as well.  

What are the Conditions for Claiming LTA?

Now that you’re aware of what LTA is, let’s look at the conditions you need to meet to claim leave travel allowance from your employer.  

• You must be a salaried employee working in a governmental organisation, a public sector company or a private organisation. 
• You must have incurred travel-related expenses while on leave. The travel-related expenses can be for yourself and your family. 
• You must have travelled within the domestic territory of India. Any expenses in connection with international travel cannot be claimed. 
• You can claim leave travel allowance only for a maximum of two trips within a block of four calendar years. Furthermore, you can lodge an LTA claim only once per year. 
• You must provide documentary evidence in the form of bills or invoices to your employer to prove that you travelled. 
• You must claim LTA within the stipulated time frame for the same. If you have any unclaimed leave travel allowance, it can be carried forward to the next block of four calendar years. However, the brought forward LTA must be used within the first year of the next block, failing which it will lapse. 

What are the Documents You Need to Submit For Claiming LTA?

To claim leave travel allowance, you’re required to submit a set of documents to your employer. Let’s take a quick look at what these documents are. 

• A copy of the leave approval form or email you receive from your manager for the duration of travel you intend to claim. 
• A duly filled out LTA claim form outlining the details of the claim being made. 
• A comprehensive itinerary clearly stating the places you visited and the total duration of travel. 
• A copy of the tickets, whether the travel is by air, train or road, for yourself and your family. 
• Bills and invoices for all of the other expenses that you incur during your travel, such as hotel bills, restaurant bills and taxi receipts, among others.
• A copy of the PAN card. 
• A copy of the bank account statement clearly mentioning your account details, such as your name, account number and IFSC. 

Note: The list of documents mentioned above is merely illustrative and not exhaustive. Your employer may request additional documentation in connection with your travel before disbursing LTA. 

What is the Procedure to Claim LTA?

Here’s a quick overview of the procedure you need to follow to claim leave travel allowance from your employer. 

• Step 1: Submit the duly filled and signed LTA claim form, clearly specifying the claim amount.
• Step 2: Submit all the necessary documentation, such as travel tickets, hotel stay invoices, boarding passes, restaurant bills and local travel receipts as proof. 
• Step 3: Submit a copy of the signed leave approval form or email from your reporting manager or any other authorised personnel. 

How to Calculate the Tax-Exempted Portion of Leave Travel Allowance?

Section 10(5) of the Income Tax Act, 1961 empowers salaried employees receiving leave travel allowance to claim it as an exemption from their total taxable income. Here’s how you can calculate the amount of LTA that you can claim as an exemption under the Income Tax Act, 1961.

• Step 1: Determine the maximum amount of LTA you’re eligible to receive from your employer. 
• Step 2: Determine the total travel cost incurred by you and your family during the stipulated leave period.  
• Step 3: Calculate the maximum amount of LTA exemption available as per the Income Tax Act, 1961. In the case of air travel, the maximum amount of LTA exemption as per the act is limited to economy class fare. In the case of railway travel, the maximum amount of LTA exemption is limited to the 1st Class AC fare. In the case of travel by road, the maximum amount of LTA exemption is limited to the 1st Class or Deluxe Class bus fare. 
• Step 4: Compare the actual travel cost you incurred with the maximum amount of LTA exemption available as per the Income Tax Act, 1961. 

If the actual cost is lower than the maximum amount of exemption available under the act, the entire travel cost you incurred will be exempt from tax. 

However, if the actual cost is higher than the maximum exemption available under the act, you can claim only the amount specified under the act as an exemption. The remaining amount that was reimbursed to you by your employer will be added to your salary income and taxed as per the income tax rate applicable to you. 

What are the Restrictions for Claiming LTA?

As a salaried employee eligible for leave travel allowance, you must be aware of the various restrictions for claiming the allowance.

• You can claim LTA only for travel within the territories of India. 
• You can claim leave travel allowance only two times in a block of four years. 
• You can lodge a claim only once during a year. 
• You can only claim the actual travel costs that you incur during the trip. 
• You need to provide valid documentary evidence to support your LTA claim. 

What are the Advantages of LTA?

Leave travel allowance is a useful perk for salaried employees. Here’s a quick glimpse of some of the advantages of this allowance. 

• Leave travel allowance indirectly promotes domestic tourism by encouraging employees and their families to travel within India. 
• Claiming LTA from your employer can reduce the overall out-of-pocket costs you incur during your travel or vacation. 
• By encouraging employees to take a break from work, the LTA scheme promotes work-life balance. 
• Leave travel allowance can be claimed as an exemption under section 10(5) of the Income Tax Act, 1961, ultimately reducing your total taxable income and consequently your tax liability. 

LTA: An Example

Assume you’re a salaried employee in a public sector undertaking (PSU). Your total LTA eligibility is ₹80,000. You decide to go on a trip to Shimla along with your family. The total cost for the trip comes to about ₹60,000, which you claim from your employer. 

Out of the total trip cost of ₹60,000, you spend only ₹30,000 for travel. The remaining ₹30,000 is for covering other expenses like hotel stays and restaurant expenses. 

Now, as per section 10(5) of the Income Tax Act, 1961, the maximum amount you’re eligible for exemption is ₹40,000. However, since the actual travel cost is lower than the maximum exemption amount, you can claim only ₹30,000 as an exemption under the act. 

The remaining ₹30,000 will be added to your salary income and taxed according to the income tax rate applicable to you. 

Furthermore, assume you don’t claim the remaining LTA amount of ₹20,000 within the current block of four calendar years from your employer. This amount can be carried over to the next block of four years, boosting your total LTA eligibility to ₹1 lakh (₹80,000 + ₹20,000). However, the brought forward amount of ₹20,000 must be claimed within the first year of the next block of four years, failing which it will lapse. 

Conclusion

With this, you must now be aware of what leave travel allowance is. It is a useful financial benefit that employers offer to their employees to facilitate travel during their leave period. Although you can claim LTA for all kinds of travel and vacation-related expenses for yourself and your family from your employer, you can only claim an exemption for the travel cost you incur under section 10(5) of the Income Tax Act, 1961. Therefore, this is something that you need to factor in when assessing your total taxable income.  

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