Leave Travel Allowance Tax Exemption

Leave Travel allowance commonly known as LTA, is an allowance you get from your employer when you are on leave from work to anywhere in India. It covers the cost of travelling expenses incurred during the trip and is one of the best ways to save taxes by the salaried employees.

What type of travelling expenses does LTA cover in order to claim exemption while filling income tax return?

In order to claim leave travel allowance exemption, the expenses should only be incurred for travelling. Hence expenses on hotel rooms, sightseeing, food etc cannot be included. Trip can be taken in the following modes:

  • Journey performed by air: LTA tax benefit can be claimed for economy air fare of national carrier by the shortest route or the amount spent which ever is less.
  • Journey performed by rail: LTA tax benefit can be claimed for AC First class rail fare by the shortest route or amount spent which ever is less.
  • Journey performed by any other mode: If a recognized mode of transport exists, LTA tax benefit can be claimed for deluxe class fare of such transport otherwise for AC First class rail fare by the shortest route or the actual expense incurred whichever is less.
  • Holiday Package: LTA exemption can be claimed only for the amount spent on Air or railway or road transport.

What are the LTA Claim Rules?

In order to claim tax savings on leave travel allowance received, following conditions should be satisfied :

  1. You should be on leave.
  2. You should travel anywhere in India i.e. only domestic travel is covered.
  3. During such travel you may have your family with you
  4. LTA is a part of salary component.
  5. Family includes spouse, children as well as dependent parents, brothers and sisters.
  6. Children are restricted up to 2 surviving children unless the birth after one child has resulted in multiple births.

Taxability and Exemption limit of Leave Travel Allowance (LTA)

Leave Travel Allowance (LTA) is exempt from tax only when it is received to meet the cost of travelling on leave. However, where a company is providing this allowance even when the employee is not on leave, its exemption can not be claimed and shall be taxable as income under the head salaries.

LTA exemption is limited to the amount of LTA paid to the employees as part of the cost to company. One cannot claim exemption beyond the actual LTA amount being provided. Also leave travel allowance exemption is available for the shortest route travelled and can be availed only for travel on working days.

When can Leave Travel Allowance Exemption ( LTA ) exemption be claimed?

Leave Travel Allowance Exemption (LTA) can be claimed twice in a block of four calendar years. At Present, the block is from 1st January 2014 to 31st December, 2017 i.e. an employee can claim exemption only for two journeys in block of four years starting from 1st day of January, 2014.

What if claim for LTA exemption is not taken in last block?

If an individual does not use their exemption of availing LTA during any block of four years on any one or on both occasions, their LTA exemption of one journey can be carried over to the next block but can be claimed only in the first year of the next block.

For ex: If you could not completely utilize your LTA exemption in 2010-13, then you will be able to take the pending LTA of one journey in 2014 along with the original two journeys pertaining to the respective block. However, the first journey is to be undertaken in the first year of the block itself whereas the rest of the two journeys can be undertaken at anytime till 31st December 2017.

HRA Calculation and Exemption December 30, 2014

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