LTA: Meaning, Benefits, Eligibility & How to Claim

Do you know you can save tax while travelling with your family? Leave Travel Allowance (LTA) is a claimable deduction available for salaried employees in India. It provides exemption from taxes for travel expenses within India. It allows employees to take time off work while decreasing their taxable income.  

However, some conditions need to be fulfilled like taking a leave from the office and providing proof of travel. Knowing how this works can help you plot your journey in advance while maximizing your tax savings. 

What is Leave Travel Allowance (LTA)? 

Leave Travel Allowance (LTA) is a tax benefit provided by employers in India to cover an employee's travel expenses during leave. It applies only to domestic travel by air, rail, or road for the employee and their immediate family.  

Employees can claim LTA for their spouse, children, and dependent parents or siblings. Note that LTA is always subject to conditions like proof travel expenses, ticket verification etc. 

Key Features of LTA 

1. Limited to Two Journeys: Employees can claim LTA for a maximum of two trips in a four-year block. A single trip can be rolled over to the next block if they don't use the benefit.  

So, employees can plan their vacations accordingly and still save tax by claiming deductions on their travel expenses. 

2. Applicable for Domestic Travel: LTA can only be claimed for travel within India. Employees are not allowed to claim exemptions for trips abroad and the trip has to be completed by domestic airlines, railway, or road travel. LTA contributes to local tourism while also helping you save more with tax benefit. 

3. Tax-Exempt on Travel Fare Only: LTA exemptions apply only to travel fares, such as tickets for flights, train rides, or buses. The tax-exempt amount is subject to a ceiling, encouraging employees to plan their trips wisely to maximise this benefit. 

Eligibility Criteria to Claim LTA 

• Leave Taken from Work: 

To make an LTA claim, employees have to take a leave from work. LTA can only be claimed for personal travel expenses. This benefit motivates employees to take planned leaves while taking advantage of tax savings. 

• Salaried Employee: 

Only salaried employees who have LTA included in their salary package can claim this deduction. If you are a freelancers, businessowner, or self-employed individual, you will not qualify for LTA.   

• Travel with Family Members: 

LTA comes into play when employees travel with their family members including a spouse, children, parents and siblings. This way, employees can enjoy a family trip and also lower their tax liability. 

• Proof of Travel Expenses: 

To claim LTA, employees must provide proof of travel. This proof can include flight/train tickets, boarding passes, booking emails etc. Employers will review these documents before granting LTA exemptions to ensure tax compliance. 

What Expenses are Covered Under LTA? 

Eligible Expenses 

• Air Travel: Employees can claim LTA exemptions for air travel. However, only economy class fares of a national carrier or an equivalent fare on a private airline will be eligible. Business class tickets are not covered under LTA. 

• Train Travel: LTA covers train travel expenses, but only for AC first-class or lower-class fares. The exemption will only be applicable when you take the shortest train route possible to your the destination. Employees must retain valid tickets to claim tax benefits under this exemption. 

• Bus Travel: Employees can claim LTA exemptions for travel via state-recognised public transport or private transport services with equivalent fares. ​​To claim LTA, valid fare receipts must be submitted. Luxury or premium private buses are not eligible for this exemption. 

Non-Eligible Expenses 

• Food and Sightseeing: LTA benefit does not apply to meals, shopping, and sightseeing expenses. Although travel is exempt, these extra costs are still subject to tax. 

• Private Vehicle Travel: LTA exemption is also not applicable for travelling with a private car or rented vehicle other than with valid fare receipts. To avail of these benefits, employees need to use authorised transportation services with valid tickets.  

• Accommodation: Hotel stays or lodging expenses will not be covered under LTA. Moreover, hotel booking receipts will not be considered as valid travel proof for LTA deductions.   

Tax Benefits of LTA Under Section 10(5) of the Income Tax Act 

Under Section 10(5) of the Income Tax Act, LTA offers a great opportunity for salaried employees to reduce their taxable income. Since there is no fixed amount, the actual tax benefit depends on the employee's travel costs and their applicable tax slab.  

LTA can also form a part of the salary package provided by the employer. This benefit is a great way for employees to save taxes and it gives employees the freedom to plan their travel accordingly. 

How to Claim LTA? 

1. Submit a Claim: An employee needs to submit an LTA claim with their employer. They are required to provide information about the trip and disclose the total amount they are claiming under LTA. 

2. Provide Documentation: While claiming LTA, the employees are required to submit supporting documents in the form of boarding tickets, travel tickets, hotel bills, and other similar transactions related to travel.  

3. Use the Exemption: The LTA exemption can only be claimed if the employee has actually travelled during the specified period. Employees are eligible for the exemption only if the travel occurs within the same four-year block of calendar years. 

4. Proof of Leave: Employees will also have to prove that they have taken a valid leave from their company/employer. Travel expenses that are incurred without a valid leave will not be eligible for LTA. This proof can come in the form of a leave approval document from the employer. 

5. Time Limit: Employees can claim LTA exemption only twice within a four-year block, and any unused exemption cannot be carried forward beyond this period. However, under the carry-over concession, if an employee does not utilise one exemption within the block, they can claim it in the first year of the next block. So, be sure to claim your LTA benefits as soon as possible to avoid losing out on this benefit.  

Takeaway 

Leave Travel Allowance (LTA) is an excellent way for salaried employees to enjoy tax benefits while exploring domestic destinations. By following the proper procedure and meeting the eligibility criteria, employees can reduce their taxable income and fully benefit from this exemption. 

It is important to note that only travel-related costs, such as transport fares, are covered under LTA. By maintaining all required documents and ensuring that all conditions are met, employees can efficiently claim this exemption and enjoy a tax-free trip within India.