Leave Travel Allowance (LTA) Scheme is introduced by the Income Tax Department of India in the act 1961. Which provides various tax exemptions to the salaried class. LTA is a allowance given by an employer to its employee. Which can be utilized when the employee goes on a vacation. In this post let us understand everything an employee and an employer should know about the Leave Travel Allowance Scheme.
- What is Leave Travel Allowance Scheme?
Leave Travel Allowance is an allowance given by the employer to its employees on his/her vacation period. In a simple language, the employer gives some Travel allowance (Money) to its employee. So that the employee can travel to its destination of the vacation. The amount that is received from the employer is under tax exemption.
As simple it sounds, it isn’t there are few factors that needs to be considered before allocating such allowances as well accepting such allowances.
- How much allowance can an employer allocate for LTA?
LTA Component is depending on the employer and the CTC of the employee. These details of the allowance can be found in the described CTC.
- What are the conditions for claiming the LTA?
There are few conditions for claiming the LTA.
a. Actual Journey:
The employee must travel to claim the LTA benefits. I.e., Actual journey is must.
b. Only Domestic Travel:
Only domestic travels can be claimed in the LTA scheme. No international travel expenses can be claimed in the LTA.
c. Employee & Family Travel:
The exemption for travel is available for only employee alone or with his family. Where family includes the employee’s spouse, children, and Parents, brothers, sisters who are wholly or mainly dependent on the employee.
Further to this, exemption is applicable if the employee has more than 2 children born after 1 October 1998.
d. Mode of Travel:
The allowance is available only on the travel expenses. That is Air, Rail and Bus fares incurred by the employee.
Air: The amount is restricted to the air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination.
Rail: The amount spent for any mode of transport other than by air, restricted to air-conditioned first-class rail fare by the shortest route to the place of destination.
By Road: If the place of journey and destination are not connected by any recognized public transport system. The amount equivalent to first class air-conditioned rail fare, for the distance of the journey by the shortest route as if the journey has been performed by rail.|
e. Food and other expenses:
LTA Can only be claimed on the travel expenses, you cannot claim LTA on the expenses incurred for Food, Hotel, and any other expenses.
- How can I claim LTA in case of Multi-destination journey?
If you are making a journey to multiple destinations while travelling, LTA can be claimed on only admissible expenses incurred on the shortest route available from the place of origin and the farthest point of journey.
- What are the documents that needs to be submitted to claim the LTA?
It is not mandatory to submit any bills to the employer to claim the tax benefits, however, the tax authority may demand the proof of travel by issuing a notice. So, it is advised that to keep the bills safe to justify the expenses or submit the bills with employers.
- Can LTA be claimed on every year vacations?
No, LTA cannot be claimed on every year vacations. LTA exemption is available for only 2 journeys in a block of 4 calendar year.
Block of 4 year is decided by the government for LTA exemption purposes. Current block of 4 years is started in 2018-21. The next block of 4 years would be 2022-26.
In one calendar year employee cannot claim 2 LTA’s. in a calendar year the employee can claim only 1 LTA and 2 LTA’s in a block of 4 years.
- Can unclaimed LTA be carried forwarded?
Yes, one travel from the previous years block can be carried forward to the next years block. And it can be claimed only in the first year of the block. For Ex: If you have claimed only 1 LTA in the current block 2018-21 and you wish to carry forward the remaining 1 LTA. Then you can do it by traveling in the first year of the next block. That is in the year 2022 itself.
- What is the procedure to claim the LTA?
Procedure to claim the LTA is generally employer specific. Employer announces the due date to claim the LTA. Within which the employees may require to submit the proof of travel such as tickets, boarding pass, etc.
Many employers allow their employees to claim the LTA only if the employee applies for leaves and travel during that time. Such organizations may reject claims for travel on weekends and official holidays.
- What happens if I don’t travel or claim my LTA at all?
Your LTA is a component of your salary, it gets credited in to your account as a part of salary on a regular basis, However, if you don’t travel at all than you cannot claim the LTA received for tax exemption purposes. In that case the received LTA will be added to your net taxable income.
If you need more information or any help with claiming your LTA feel free to reach out to us at firstname.lastname@example.org.