If you are a working professional, you may have heard much about leave travel allowance, which is LTA’s full form in your salary breakdown. But are you taking the full benefit of LTA? Are you aware of ways to utilise your LTA in the best way? Probably not! Many working individuals are unaware of this tax-saving measure and ultimately fail to utilise it to their benefit. LTA is granted to employees as part of their salaries to cover the cost of their domestic travel.
This article will dig deeper into all the details associated with LTA; rules, claims, eligibility, tax exemptions, and more!
Understanding Leave Travel Allowance in Detail
A leave travel allowance is a part of the salary package/CTC (Cost to Company) provided by the employers to the employees. It is a facility to reimburse expenses incurred on travel during a domestic holiday or a vacation within the country. The main purpose of LTA is to encourage employees to take a vacation from work as it is a tax benefit in India, meaning that LTA is exempt from income tax up to a certain limit. As per section 10(5) of the Income Tax Act, 1961, LTA includes travel expenses of the employee and their family, like their air, road or rail transport fares.
LTA in salary is only applicable to two domestic journeys taken in a block of four calendar years. It means that if employees don’t utilise their full LTA exemption in a particular block, they can utilise the remaining amount by carrying it forward in the next block. It provides flexibility for employees to plan their travel and make the most of their LTA benefits over a longer period. It is an important compensation that can not only reduce the employees’ taxable income but also allow employees to travel anywhere within the country.
Also Read: Section 10 of Income Tax Act
Important Conditions to Claim LTA Exemption
You need to fulfil certain conditions to take benefit of the LTA allowance. These are:
- Leave travel allowance must be a component of the employee’s salary structure.
- LTA exemption can only be claimed for travel within the country, i.e. India and not for any international journeys.
- The family members eligible for LTA include:
- Spouse and children
- Parents and siblings who are dependent on the employee
- Two children who were born on or after 1st October 1998.
- LTA will only cover the cost of travel for the trip via rail, air or any other opted mode of transport. It does not cover any expenses for food, hotel accommodation, etc.
- Employees are eligible for an exemption for only two trips during a block of four calendar years. The current block for leave travel exemption is from 2022 to 2025.
- If an employee fails to avail of the LTA exemption in the LTA block year, it will be carried forward to the next block for further utilisation.
Eligibility Criteria for LTA Claim
Now that you are well aware of all the conditions for taking LTA benefits, it is also important to check whether or not you are eligible for it. Consider the following eligibility criteria to check the same:
- The employee must be a salaried individual and must have incurred travel expenses.
- The travel must be limited to within India and cannot cover international travel.
- The LTA exemption can only be claimed if the employee has taken leave from work specifically for travel purposes.
- The exemption can be claimed for a maximum of two journeys taken during a block of four calendar years.
- The employee must provide evidence of travel expenses, such as receipts, boarding passes, and hotel bills, to their employer.
- The LTA exemption can only be claimed if utilised by the employee within the specified time frame. Failure to do so will result in the lapse of the exemption.
LTA Rules for Various Modes of Transport
Determining the LTA amount depends on the rules designed for the specific mode of transportation. These are:
- When the destination selected is not directly accessible by recognised public transport, the LTA costs will be determined based on the fare of AC first-class rail tickets from the point of origin-destination to the selected travel destination. Here it is assumed that your journey is made by rail and only a shorter route to reach the destination is taken.
- If the travel destination is accessible by other modes of transport except for trains, then the exempted travel cost or LTA is determined based on either deluxe class or first class on available transport. Here also, it is assumed that a shorter route is taken.
- When the destination is reachable by train, the LTA cost will be determined based on the fare of a fully air-conditioned first-class train ticket for a shorter route for reaching the destination, regardless of whether the actual journey was made by train.
- If any LTA-eligible employee chooses to travel by air, the LTA cost will be based on the ticket price of the economy class, following the shortest route possible for reaching the destination.
How to Claim the Leave Travel Allowance Exemption?
Claiming LTA depends on the unique policy and procedure of the organisation. However, we have compiled some general steps to help you claim your LTA benefit seamlessly:
- Review your eligibility: Before applying for an LTA claim, you must be eligible and have served in the organisation for the required years. Hence, you must review the LTA rules and regulations in advance and apply for a claim accordingly.
- Plan your domestic travel: To proceed with the LTA claim, you must also plan your domestic travel beforehand and choose a suitable mode of transport to use on the trip. Gather all your necessary documents related to your travel, like boarding passes, tickets, and other travel invoices.
- Fill out the application for LTA benefit: Once you have planned your trip, complete the LTA application form offered by the employer. Fill out the relevant travel-related details like date of travel, mode of transport, destination, and all the cost estimation.
- Add proof of travel: This is the most important step as here you have to submit your filled application form along with all the relevant travel documents like tickets, boarding passes, etc. All these documents will serve as proof of your travel and the LTA claiming process.
- Wait for LTA approval and reimbursement: Once you submit the LTA application, it goes to the management for approval. After approval, you will be entitled to receive your LTA reimbursement either as a separate payment or along with your salary.
In conclusion, leave travel allowance is a tax-saving benefit that must be utilised in the best way by the employees. It not only allows the employees to enjoy an earned vacation within the domestic boundaries but also saves their cost of travel to a great extent. With all the conditions and eligibility of LTA discussed above, one can analyse and see whether they are eligible to seek the LTA claim as per their company’s policies. The company will reimburse the LTA after assessing the mode of transport. If LTA makes up for one of the components of your salary, then do not forget to utilise it.