What is LTA – Leave Travel Allowance?
LTA (Leave Travel Allowance) is an allowance paid by employers to their employees when they are on leave and travelling either alone or with family within India. Subject to certain conditions laid down in the income tax act, it is tax-free in the hands of the employees. There are several factors that need to be considered before planning a trip for the purpose of claiming LTA.
LTA Exemption as per Income Tax Act
Section 10(5) of the Income Tax Act along with Rule 2B has prescribed the conditions and amount of exempt leave travel allowance. Subject to these conditions, Leave Travel Allowance is exempt in the hands of the employees only under the old tax regime.
Conditions to Claim LTA Exemption
- Leave travel allowance should be a part of the employee’s salary structure i.e employer pays an allowance to an employee as part of their salary.
- An exemption is available for actual expenses incurred by the employee including their family for domestic travel only.
- Family for purpose of leave travel allowance includes:
- Spouse and children
- Parents, brothers, and sisters who are wholly or mostly dependent on the employee.
- Further, this exemption can be claimed for a maximum of two children born after 01/08/1998. For children born prior to this date, there is no restriction.
- It covers only the cost of travel for the trip (travel by rail, air or any other public transport). It does not cover the cost of hotel accommodation, food, etc.
- An exemption is available only for two trips in a block of four calendar years. The current block for leave travel is from 2022 to 2025.
- If an exemption is not availed during the block period, it can be carried over to the next block and used in the first year of the next block.
Let’s understand this with an example:
|Year of Journey||LTA Block year 2014-17||LTA Block year 2018-21|
|September 2016||Exemption claimed in September 2016||Not Applicable|
|July 2018||Not Applicable||Exemption claimed in July 2018 (carried over from the previous block)|
|May 2020||Not Applicable||Exemption claimed in May 2020|
|August 2021||Not Applicable||Exemption claimed in August 2021|
Note: Had the exemption of July 2018 been claimed in the year 2019, then it would not have been considered as carried over from the previous block and the third trip in block 2018-21 (August 2021) would be taxable in the hands of the employee.
Eligibility to Claim Leave Travel Exemption
The LTA exemption is available only on the actual travel costs. Expenses such as sightseeing, hotel accommodation, food, etc are not eligible for this exemption. It is also limited to the LTA provided by the employer. For eg: If the actual expense incurred is INR 50,000 but LTA as part of Salary is INR 35,000 then the maximum exemption available would be INR 35,000 only.
Exemption when various modes of transport are used for travel
|Place of origin and destination are connected by rail||Actual amount spent (mode other than air) restricted to cost of travel in first class A.C. through rail by the shortest route possible|
|Journey performed by air||Actual amount spent is restricted to airfare of economy class national carrier by the shortest route possible|
|Place of origin and destination are not connected by recognized public transport||Actual amount spent is restricted to the cost of travel in first class A.C. through rail by the shortest route possible as if it was performed by Indian railways|
|Place of origin and destination are not connected by rail but are connected by other recognized public transport||Actual amount spent is restricted to first class or deluxe class fare by the shortest route possible|
How to Claim Exemption on Leave Travel Allowance?
Employees can claim Leave Travel Allowance exemption by submitting details in Form-12BB. With the newly introduced Form 12BB, employees can provide detail of their travel during the financial year. They should also submit the proof in support of their claim. Further employees can submit boarding passes, air tickets, train tickets, invoices from travel agents, etc, as documentary proof to their employers.
No. LTA can be claimed only for domestic travel. You can only claim LTA if the Employer provides it as part of your salary structure. You can claim an exemption on LTA under section 10.
If an employee is travelling to different locations on a single vacation then the exemption available will be for the travel cost eligible from the place of origin to the farthest location by the shortest route possible.
It depends on the organisation’s policies as many companies allow LTA exemption only if employees take specific leave for vacation and not on official holidays or weekends.
No. You can claim LTA only twice in a block of 4 years. The current block of four years is 2018-2021. However, you can claim LTA reimbursement every year from your employer.
Employees do not have to submit any proof to Income Tax Department while filing ITR on IT Portal. However, employees are advised to maintain proof such as flight tickets, invoices from travel agents, passes, etc.
Employees can know the exempt Leave Travel Allowance amount from Form 16 issued by the employer at the end of the financial year. It is exempt u/s 10(5) of the Income Tax Act.
Since Leave Travel Allowance is a part of salary income. An employee can file ITR-1 while claiming exempt HRA. However, salaried needs to file ITR-2 if their income is more than Rs. 50,00,000.
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.
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