Leave Travel Allowance (LTA): Eligibility, Tax Exemption, Claim Rules, & More

LTA is a benefit that allows you to explore your travel dreams while enjoying tax benefits. Whether you’re planning a vacation with your family or a solo adventure, understanding LTA can make a significant difference in how you plan and budget your trips.

In this blog, we will guide you through the ins and outs of LTA, including eligibility criteria, claiming process, and tips on maximizing your travel allowance. We will also discuss the latest updates and changes in LTA regulations, ensuring that you have the most up-to-date information at your fingertips.

What is LTA?

Leave Travel Allowance (LTA) is a component of an employee’s salary package provided by some employers in India. It is a benefit that aims to cover the expenses incurred by an employee when they travel with their family or dependents within the country during their leave period.

The amount of LTA varies depending on the organization’s policies and the employee’s salary structure. It is usually a predetermined percentage of the employee’s basic salary. LTA can be claimed for two journeys in a block of four calendar years, as determined by the employer. If an employee does not claim LTA in a particular block, it can be carried forward to the next block.

To claim LTA, employees need to meet the eligibility criteria set by their employer. Typically, LTA is available to all employees, regardless of their designation or position. However, there may be specific conditions related to the length of service or completion of a certain period before becoming eligible to claim LTA. Immediate family members, such as the spouse, children, and dependent parents or siblings, are generally eligible for LTA. However, the definition of immediate family members may vary depending on the employer’s policy.

LTA is subject to certain conditions and tax exemptions as per the Income Tax Act of India. To avail the tax exemption, employees must submit proof of travel expenses, such as travel tickets and hotel bills. It is important to note that LTA can only be claimed for travel within India and does not cover international travel expenses.

Note: A “block year” is a four-year period used for LTA (Leave Travel Allowance) exemption. It’s different from the regular financial year. The very first block started back in 1986. These blocks are usually four years long and include years like 1986-1989, 1990-93, 1994-97, and so on. The current block year for claiming LTA is 2022 to 2025.

Eligibility Criteria for LTA Claim

To determine if you are eligible to claim LTA benefits, consider the following criteria:

• You must be a salaried individual and have incurred eligible travel expenses.
• The travel should be within India and cannot include international destinations.
• LTA exemption can be claimed only if you have taken leave from work specifically for traveling.
• Eligible family members for LTA include parents, dependent siblings, spouse, and children.
• You can claim LTA exemption for a maximum of two trips within a block.
• You need to provide evidence of travel expenses, such as receipts and boarding passes, to your employer.
• LTA exemption can only be claimed if you utilize it within the specified time frame. Failure to do so will result in the lapse of exemption.

Note: It is important to note that LTA can only be claimed for travel expenses and does NOT cover other expenses such as accommodation or food. Additionally, there are certain conditions and restrictions set by the employer and the Income Tax Department on the eligible modes of transport, destinations, and frequency of travel for claiming LTA.

Also Read: Section 10 of Income Tax Act

LTA Benefits for Salaried Individuals

Claiming LTA (Leave Travel Allowance) on your salary offers several advantages:

• Tax Savings: LTA is exempt from income tax in India, up to a specified limit. This reduces your taxable income and helps lower your overall tax liability.
• Cost Coverage: LTA allows you to recover a portion of your travel expenses incurred during domestic vacations. It helps offset the cost of travel, making it more affordable for you.
• Flexible Travel Planning: LTA gives you the freedom to plan and choose your domestic travel destinations and modes of transport. This flexibility allows you to tailor your vacations according to your preferences.
• Carry-Forward Option for LTA: If you don’t utilize the entire LTA allowance in a given block, you can carry forward the remaining benefit to the next block. This provides you with more time to plan and use your LTA effectively.
• Support for Family Travel: LTA often covers family members, including spouses, children, and parents. This allows you to plan family vacations and claim benefits for their travel expenses as well.

How Much Can Be Saved With LTA?

The amount that can be saved with Leave Travel Allowance (LTA) depends on various factors, such as your salary, the LTA component in your salary package, and the rules and regulations set by your employer or the government.

To determine how much you can save with LTA, you need to consider the following:

• LTA component: Check your salary package or consult your employer to find out the amount of LTA included.
• Travel expenses: Calculate the actual travel expenses you spent during the specified period or check if there is a specific limit set by your employer or the government.
• Tax exemption limit: Find out the tax exemption limit set by your employer or the government. This can vary based on factors such as the mode of travel (air, train, etc.) and the destination.

The LTA (Leave Travel Allowance) exemption applies only to the actual travel expenses incurred by the employee, such as train fare, bus fare or airfare. 

For example, let’s say the employer provides an LTA of Rs 40,000. However, the employee’s actual travel expenses amount to Rs 25,000. In this case, only Rs 25,000 will be eligible for exemption, and the remaining Rs 15,000 will be included in the employee’s taxable salary income.

LTA Rules for Various Modes of Transport

Exemptions for different modes of transportation:

1. Air Travel:

• You can claim the lower amount between your actual expenses or the economy class airfare of the national carrier (Indian Airlines or Air India), whichever is less.

2. Other Modes of Travel:

• If rail service is available, you can claim the lower amount between your actual expenses or the air-conditioned first class rail fare, whichever is less.

• If rail service is not available:
  • If there is no recognized public transport system, you can claim the lower amount between your actual expenses or the first class rail fare for the distance of your journey, as if it were performed by rail.
  • If a recognized public transport system exists, you can claim the lower amount between your actual expenses or the first class or deluxe class fare, whichever is less.

Can You Claim LTA Exemption for Every Vacation?

No, it is not possible to claim LTA exemption for every vacation. In India, the LTA exemption can be claimed for a maximum of two journeys performed in a block of four calendar years. Any additional vacations taken during this period will not be eligible for LTA exemption.

LTA Claim for Multi-Destination Travel

If you visit multiple cities on your vacation and want to claim LTA (Leave Travel Allowance) exemption, the LTA will cover the round-trip cost from your home city to the furthest city you visit. In simple terms, it will reimburse you for the most expensive segment of your travel.

Let’s say you live in Delhi and plan a vacation to Mumbai, Kolkata, and Chennai. The LTA (Leave Travel Allowance) will cover the cost of the round-trip travel from Delhi to the furthest city visited. 

If the round-trip travel cost from Delhi to Mumbai is ₹3000, Delhi to Kolkata is ₹7000, and Delhi to Chennai is ₹9000, the LTA exemption will be based on the cost of the trip to the furthest city, which is Chennai in this case. So, you can claim an LTA exemption of ₹9000 for your vacation.

How to Claim the Leave Travel Allowance Exemption?

To claim the Leave Travel Allowance (LTA) exemption, the process may vary depending on your employer. Your employer will set a deadline for when you can claim the LTA. You may be asked to provide proof of your travel, such as tickets, boarding passes, or invoices from your travel agent. While it’s not always required, keeping copies of these documents for your records and submitting them to your employer if needed, based on the company’s LTA policy or if requested by tax authorities.

After verifying your LTA claim, your employer will reimburse the eligible amount. The reimbursement may be made as part of your salary or separately, depending on your employer’s policies.

Also Read: TDS on Salary – Calculate Deductions & Exemptions

LTC Cash Voucher Scheme (For Government Employees)

LTC stands for leave travel concession. The LTC Cash Voucher Scheme was introduced to boost the Indian economy. It allows people to claim tax exemption on Leave Travel Concession (LTC) without actually travelling. To qualify for this benefit, you need to follow these guidelines:

• Buy goods and services worth three times the LTC fare amount, with a minimum of 12% GST. (Meaning: if your eligible LTC amount is Rs. 60,000, you must spend at least Rs. 1,80,000 (60,000 multiplied by 3) on eligible purchases to claim the tax rebate)
• Make the purchases between October 12, 2020, and May 31, 2021 (deadline extended from March 31, 2021).
• Pay for the purchases digitally and ensure the invoice clearly shows the GST number and amount paid.
• The maximum exemption per person is Rs. 36,000.

Let’s say you are eligible for an LTC amount of Rs. 50,000. To get the tax rebate under the LTC Cash Voucher Scheme, you need to spend at least Rs. 1,50,000 (50,000 multiplied by 3) on eligible purchases. By doing this, you can claim the maximum exemption of Rs. 36,000.

Keep in mind that the final invoice value may be more than Rs. 1,50,000 because of the 12% GST. But your actual expenses will be lower than the invoice value.

Note: These cash vouchers must be used before the expiration date of March 31, 2023.

Can Unclaimed LTA be Carried Forward to Next Block Year?

You can choose to carry forward any unused Leave Travel Allowance (LTA) from one block year to the next, as long as you meet certain conditions. To do this, it is important to utilize this benefit in the first calendar year of the immediately following block.

In simpler terms, if you have not utilized the full LTA exemption for one or two trips within a specific block of four years, you have the option to transfer the remaining benefit to the next block. Just remember to claim it in the first year of that new block.