Tax Tips – Tell me…”Do I get any tax benefits from Leave Travel Allowance?”

18 Dec

As we approach the end of the financial year, many of us are busy arranging for travel bills to be submitted to our employer in order to claim Leave Travel Allowance (LTA) exemption and some of us are even planning a vacation. Let’s see how LTA exemption is calculated by employers.

Leave Travel Allowance is actually a rather simple tax-saving benefit that covers your holiday expenses.Leave Travel Allowance is granted to employees to meet cost of travel on leave to any place in India. For LTA it is essential that:

  • You’ve taken leave from the office
  • The travel is performed to any place in India

What’s covered?

The exemption is allowed only in respect of the fare. Expenses incurred towards boarding and lodging or on conveyance to and from the railway station/airport do not qualify for exemption.

Meaning :Only the travel costs, not the eating and partying or hotel bills.

So, whether you fly, hop on to a train or take public transport, you can show the ticket and claim your LTA.

What if you want to travel by a car? If a car is owned by a central government organisation like ITDC, the state government or the local body, LTA is permitted.

If you could not get public transport and resorted to private transport, try and get a bill. If the bill is not accepted by your employer, you can always file an income tax return, claim an exemption and get a refund.


How often can I claim this exemption?

You can claim LTA exemption twice in a block of four calendar years. The current block is 2006-09. Thus, during the period 2006-09 you can claim this exemption for any two years.

What if I am not able to claim exemption in a particular block?

Well, the good news is that if in a particular block you are not able to claim LTA exemption for both journeys or for one journey, then one journey can be carried forward and can be claimed in the first calendar year of the succeeding block. Thereafter, you can claim the remaining two journeys of that particular block. Lets understand this using an example.

Suppose Raj was not able to perform any travel in the current block, i.e., 2006-09. Now he can carry forward one journey to the succeeding block, i.e., 2010-13, and can claim it in the first calendar year, i.e., 2010. Thereafter, he can also claim the remaining two journeys of the block 2010-13. In a way, Raj will be able to avail three exemptions in the block 2010-13.

Who all can accompany me on this travel?

Any one you like to take along but travel exemption shall be available only in respect of following:

  • Your spouse and up to two children
  • Parents, brothers and sisters mainly dependent on you.

How is the exemption amount calculated? Is there any cap attached?

Travel concession received by employee shall be exempt to the extent amount spent on travel or the following specified limits, whichever is less:

Mode of Transport Maximum Exemption Limit
Air Economy Air fare on National carrier on shortest route.
Any mode other than Air
  1. Destination Connected by Rail:
    First AC Rail fare by shortest route.
  2. Destination not Connected by Rail:
    1. Where recognized public transport system exist.
      First class or deluxe class fare
    2. Where recognized public transport system does not exist.
      First AC rail fare for equivalent distance

If above table is too technical let’s try and understand with the help of following flow chart:

Is exemption allowed only for domestic travel, or can I claim international travel as well?

According to the LTA rules, international travel is not covered.

In the case where you take a travel package, your itinerary might be such it covers two Indian destinations among some international destinations as well. Here the claim can be submitted for the two Indian destinations en route. LTA shall be allowed according to the air fair charged by national carrier on the shortest route between the two Indian destinations.

For example, you might be offered the following routing for a trip to Bangkok: Delhi – Colombo – Bangkok – Colombo – Trivandrum – Delhi

The claim can be submitted for the Delhi – Trivandrum – Delhi sector, which shall be allowed to the extent of economy class air fair charged by national carrier by shortest route.

Do I need to submit travel bills to my employer to claim LTA?

In a recent judgment dated 21st January, 2009, the Supreme Court of India pronounced that the employers are under no statutory obligation to collect travel bills from the employees to allow LTA exemption. However, to be on the safer side most employers are still following traditional method of collecting travel bills to allow LTA exemption.

What if I failed to claim LTA and my employer had deducted tax on the LTA amount?

If you failed to claim LTA from your employer and your employer has deducted taxes on the amount paid, you can claim the same in your ITR and accordingly you shall get a refund of tax deducted.

Quick tips

i. You can get LTA only if you have applied for leave from your company and have actually travelled.

ii. If your family travels without you, no LTA can be claimed. You have to make the trip, either by yourself. If claiming for family, you should travel with them.

iii. You will need to keep your air, rail or public transport ticket. Or, if you rented a car, give the bill issued by the car rental company.

iv. International travel is not valid. It must be within the country.

v. Though you can claim two journeys in a block of four years, you can claim the LTA benefit just once in a year. You cannot claim both the journeys in one year. So, if you make two trips in a year, you lose one. A way out is to claim one and make your spouse claim the other.


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Posted by on December 18, 2012 in TDS


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