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Leave Travel Allowance - Provision, Exemption & Calculation

Read about the Leave Travel Allowance (LTA) that is provided to the employees for travelling. The exemption is restricted to fare cost for touring in India.

The Leave Travel Allowance is an allowance given by the employers to their employees, which can be utilised when they go for a vacation. The employee needs to submit the actual bills to the company for claiming LTA. The amount of LTA provided is different for different employers depending upon the employee's working position. Leave Travel Allowance can also be referred as Leave travel concession (LTC).

The amount received as LTA is exempt to a specified limit while computing Income from Salaries. The remaining amount would be taxed as per Income tax slab rates. The Leave Travel Allowance calculation is as under:

Particulars Amount
Amount of LTA Received 4500
Less: Amount of LTA Exempt -(3500)
Amount of taxable LTA added to Salary Income 1000

LTA Rules for Exemption u/s 10(5)

LTA Exemption is available for travel allowance given by the employer to the employee or his family. The exemption is claimed for two journeys in a block of four years. Presently, the block of 2014-2017 is going on. Income Tax Department makes these blocks. The exemption if remains unclaimed can be carried forward to next year. The LTA rules for exemption are as follows:

  1. One can travel any place in India. No international trips are considered.
  2. LTA Exemption is not allowed if it is encashed by the employee without going on any journey. The whole LTA amount is charged to tax.
  3. The family of the employee can also take a tour without the employee and still claim exemption u/s 10(5). The family here refers to employee's spouse, two children and wholly dependent parents or siblings of the employee.
  4. The exemption is available for touring while in service or after termination or retirement from service.
  5. The travel cost is only taken into consideration for exemption. No other amounts are qualified for deduction.

The amounts permitted to be claimed as LTA exemption

  1. If the employee travels through air, an economy class fare of the Airlines is allowed as an exemption.
  2. If the employee does not travel through air and the places are connected through rail, AC First Class Rail fare is granted as an exemption.
  3. If the employee does not travel by rail or air and the places are also not connected by rail or air,
  • Where Recognised mode of transport is available, First or Deluxe Class fare of such transport is allowed as an exemption;
  • Where Recognised form of transportation is not available, an amount equal to the AC First Class Rail fare (the distance of the shortest route is considered) is allowed as an exemption.