Blogs > What is Leave Travel Allowance (LTA) – with Rules Exception Calculation [Updated 2020]
What is Leave Travel Allowance (LTA) – with Rules Exception Calculation [Updated 2020]
Leave Travel Allowance (LTA) forms a part of an employee’s total CTC (cost-to-company). Also known as Leave Travel Concession, an employee can claim exemption under section 10(5) of the Income Tax Act, 1961, for expenses incurred for travelling when on leave anywhere on the behalf of the organization within the country.
Leave Travel allowance broadly categorized into two parts:
- Any travel concession or assistance received by employee from his employer for himself and his family to cover expenses incurred in travelling while on leave.
- Any travel concession or assistance received by employee from his former employer for himself or his family to cover expenses incurred in travelling post retirement or termination of services.
What is the current LTA block year?
Leave Travel Concession or LTA block years are blocks of 4 years created by Income Tax Department where exemptions can be claimed twice during each block period. The current or on-going block year is the 9th block year. The 4 years in this block are the years 2018, 2019, 2020 and 2021.
List of the expenses which have been given exemptions under LTA
In case of travel by air
The economy air fare of national carrier by the shortest route or the actual amount spent on travel whichever is less is exempt from tax.
In case of travel by rail
- The A.C. first class rail fare by shortest route or actual amount spent on travel whichever is less is exempt from tax.
- If the origin and destination spots of journey are connected by rail but journey is performed by other mode of transport and not air or rail.
- The A.C. first class rail fare by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
- If the origin & destination points are not connected by rail or air (partly/fully) but connected by other recognized Public transport system.
- The first class or deluxe class fare of such transport by shortest route or actual amount spent on travel, whichever is less is exempt from tax.
- If the place of origin & destination is not connected by rail or air (partly/fully) and not connected by other recognized Public transport system.
- The AC first class rail fare by shortest route (if the journey was performed by rail) or the amount spent on travel, whichever is less is exempt from tax.
What is Carry Over Concession?
If the assessee is not able to use LTA provided by his employer either once or twice (the permitted limit) in a 4 years block period, then he can still claim LTA exemption by using LTA in the year immediately succeeding the 4 years block period. It is known as carry over concession.
Understand the process to claim LTA
The process to claim LTA is generally employer specific. Every employer provides the due date within which employee must claim LTA and may require employees to submit proof of travel such as tickets, boarding pass, invoice provided by travel agent, etc. along with the mandatory declaration.
Though it is not necessary on the part of employers to collect proof of travel, it is always advisable for employees to keep copies for his/her records and to submit to employers based on the LTA policy of the company/to tax authorities on demand.
Conclusion
Leave Travel Allowance exemption is available through your employer. The employee just needs to submit proof and the employer will add tax liability to Form 16. This is a good way to save tax while on vacations within the country.
