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Leave Travel Allowance (LTA)

  • Author :
  • TATA AIG Team
  • Published on :
  • 02/06/2022

In the hustle and bustle of our daily lives, taking a break from the monotony and exploring new horizons is essential for our well-being. Fortunately, certain organisations understand the significance of employee rejuvenation and offer various perks to facilitate it. One such benefit is Leave Travel Allowance (LTA), a unique offering encouraging employees to embark on memorable journeys.

LTA is a component of the salary package that enables employees to claim tax exemptions on their travel expenses within India. It allows individuals to plan trips with their families and experience the joy of exploration while enjoying financial benefits. However, navigating through the intricacies and maximising the benefits of LTA can sometimes be daunting.

In this blog, we will take you through the world of Leave Travel Allowance, exploring its nuances, benefits, and the steps involved in claiming it. We will also provide insightful tips and strategies to help you maximise this valuable employee benefit.

So, fasten your seatbelts and let’s uncover the hidden treasures of LTA that can make your travel dreams a reality!

What is Leave Travel Allowance (LTA)?

LTA full-form is Leave Travel Allowance (LTA), and it is a component of the salary package provided to employees in India, governed by the provisions of the Indian Income Tax Act. It is a special allowance that allows individuals to claim tax exemptions on the expenses incurred during domestic travel with their family.

Under Section 10(5) of the Income Tax Act, LTA enables individuals to claim exemptions for the expenses incurred on travel within India, subject to certain conditions. The exemption is available for the employee's travel expenses and their family members, typically dependent children, spouse, and parents, either residing with the employee or wholly dependent on them.

How is LTA Calculated in Salary – An Overview

The calculation of Leave Travel Allowance (LTA) in salary is based on certain factors and provisions set forth by the employer and the Income Tax Act in India. Its calculation in salary involves determining the taxable and non-taxable components.

Here is a general overview of how LTA in salary is calculated

LTA Amount The LTA amount is typically a fixed percentage of the employee's basic salary. The specific percentage can vary depending on the employer's policies or the terms of employment. Alternatively, it can be a fixed amount determined by the employer.

Salary Structure The LTA is part of the overall salary package. It is added to the employee's salary structure based on the agreed-upon terms. The LTA component may be specified separately or combined with other allowances.

Block Years LTA exemption is available for a maximum of two journeys undertaken in a block of four calendar years. The government pre-defines the block years or may be specified by the employer. The LTA calculation considers the block years to determine the eligibility and tax exemption limits.

Actual Travel Expenses LTA exemption limit applies to the actual travel expenses incurred by the employee and their eligible family members. These expenses include transportation charges such as airfare, train tickets, or road travel expenses. Only the actual expenses incurred are eligible for tax exemptions, and expenses like accommodation, sightseeing, or food are not considered.

Tax Exemption The LTA amount is exempted from income tax up to the actual travel expenses incurred or as per the limits specified by the Income Tax Act. The exemption is limited to the least of the following three amounts** ' Actual travel expenses incurred by the employee and eligible family members,

LTA amount received from the employer, or

Specified limits as per the Income Tax Act.

Supporting Documents To claim LTA exemptions, the employee must provide supporting documents such as travel tickets, boarding passes, travel agency bills, or any other documents the employer requires as proof of travel expenses incurred.

Eligibility Criteria to Avail LTA from the Employee

The eligibility criteria to avail of Leave Travel Allowance (LTA) from an employer can vary based on company policies and employment terms. However, certain common aspects determine an employee's eligibility for LTA. Here are some typical eligibility criteria**

Employment Tenure Employers often set a minimum tenure requirement for employees to be eligible for LTA. For example, an employee may need to complete a specific number of years of service, such as one year or more, before becoming eligible to claim LTA.

Permanent Employment LTA eligibility usually applies to employees on the company's permanent payroll. Depending on the employer's policy, contractual or temporary employees may not be eligible for LTA benefits.

LTA Policy Employers may have specific policies regarding LTA that outline the eligibility criteria. These policies might include minimum working hours per week or specific employment grades or levels that determine eligibility.

Travel with Family LTA primarily intends employees to travel with family members. While the definition of "family" can vary, it generally includes the employee's spouse, dependent children, and parents. Some employers may have specific criteria for including family members in LTA benefits.

Domestic Travel LTA is specifically meant for domestic travel within India. It does not cover international travel expenses. Employees must travel within the country to be eligible for LTA benefits.

Submission of Proof Employees must typically submit supporting documents to claim LTA as proof of travel expenses. These may include travel tickets, boarding passes, travel agency bills, or any other documents specified by the employer.

What Are the Conditions Behind Claiming LTA?

As discussed above, LTA, or Leave Travel Allowance exemption, is a tax exemption provided by employers in India to their employees for travel expenses incurred during vacations. Certain conditions must be fulfilled to claim LTA.

  • Firstly, LTA can only be claimed for travel within India. International travel expenses are not eligible for LTA exemption.

  • Secondly, LTA can be claimed for the employee's travel expenses and their family members, typically the spouse, children, and dependent parents or siblings.

  • Thirdly, LTA can only be claimed for the cost of transportation, such as airfare, train tickets, or bus fare. LTA does not cover other expenses such as accommodation, meals, or sightseeing.

  • Fourthly, LTA can only be claimed for two journeys in four calendar years. The government specifies these blocks; currently, the block is set from 2018 to 2021.

  • Lastly, to claim LTA, the employee must provide proof of travel, such as travel tickets or boarding passes. It is important to retain these documents as evidence for future reference.

Let’s take an example to understand this better:

You, as an employee of an organisation which offers LTA, plan a vacation with your family to Goa during the LTA block of 2022-2023. You book flight tickets for yourself, your spouse, and two children. You keep all the boarding passes as proof of travel expenses. Once you return, you can claim the LTA exemption for the cost of the flight tickets incurred during your vacation.

LTA Exemption Eligibility as Per the Indian Income Tax Act

The Eligible LTA (Leave Travel Allowance) exemption allows employees in India to claim a tax benefit on the LTA amount received from their organisation. The exemption is subject to certain conditions. Employees can claim the LTA exemption on the amount spent on eligible travel expenses, including transportation for the employee and their family within India.

The amount eligible for exemption is generally limited to the specified LTA limit set by the employer. For example, if an employee receives an LTA amount of ₹50,000 from their organisation and they spend ₹60,000 as travel expense for a trip, they can claim the exemption on the actual amount spent on eligible travel expenses up to the employer-specified limit, and the ₹10,000 will be included in their taxable salary income.

LTA Exemption Rules with Respect to the Different Travel Modes

LTA (Leave Travel Allowance) exemption in India is available for various modes of travel within the country. The exemption is subject to certain conditions and limits depending on the mode of transport chosen.

Here's an explanation of LTA exemption with respect to different modes of transport

Air Travel If an employee chooses air travel, the LTA exemption is available for the airfare paid for themselves and eligible family members. The exemption is limited to the economy class airfare of the national carrier or the amount actually spent, whichever is lower.

Train Travel For train travel, the LTA exemption can be claimed for the cost of train tickets purchased for the employee and eligible family members. The exemption is limited to the actual amount spent on train tickets or the entitled class fare, whichever is lower.

Bus Travel LTA exemption can also be claimed for bus travel expenses. The exemption is limited to the actual amount spent on bus tickets for the employee and eligible family members.

[Note Irrespective of the mode of transport chosen, the exemption is available only on the actual amount spent on transportation, and other expenses such as accommodation or meals are not eligible for LTA exemption.]

Can I Claim LTA Exemption on Every Vacation?

No, LTA (Leave Travel Allowance) exemption cannot be claimed on every vacation. Some certain restrictions and conditions determine the eligibility for claiming LTA exemption.

Here's a proper explanation

Block of Years LTA exemption is allowed in blocks of four calendar years, as the government specifies. These blocks are predetermined and may vary. For example, a block of 2018-2021 means an LTA exemption can be claimed for two journeys undertaken within this block. It is important to note that the block period is fixed and does not necessarily align with financial years or vacation periods.

Two Journeys Limit Within the specified block, an employee can claim LTA exemption for a maximum of two journeys. This means that irrespective of the number of vacations taken within the block, the exemption can only be claimed for a maximum of two trips.

Is There a Process of Carryover of Unclaimed LTA?

One or two trips' unclaimed LTA is carried over to the next block year. You must, however, submit your claim for the allowance during the block's first calendar year.

For instance, you only submit one LTA claim for the block period of 2018–2021. One unclaimed trip is now carried over to the block of years 2022–2025. There are now three LTAs available for you to use in this block. However, The carried forward claim needs to be submitted during 2022.

You can claim your deduction once you've calculated the amount and submitted your tax return. Any extra money paid for LTA is deducted from your pay. This is taxed according to your tax bracket.

What is an LTA Block Year in LTA Calculations?

In the context of LTA (Leave Travel Allowance) calculation, a block year refers to a fixed period of four consecutive calendar years determined by the government. This block period is pre-defined and determines the eligibility for claiming LTA exemption. Let's explain with an example:

Suppose the government has defined the block year as 2022-2025. This means the four-year period from 2022 to 2025 constitutes one block year. An employee can claim LTA exemption for two journeys within this block year.

Now, let's consider an employee named Ravi. Ravi plans to utilise his LTA for a vacation in the year 2020. He purchases flight tickets for himself and his eligible family members, and the expenses amount to ₹30,000.

Since the block year is 2022-2025, Ravi has two journeys within this block to claim LTA exemption. In 2024, Ravi takes his first journey and incurs travel expenses of ₹30,000. He can claim an LTA exemption for this amount.

In the subsequent years of the block period, i.e., 2025, Ravi has one more opportunity to utilise his LTA for another journey. If he plans and incurs eligible travel expenses during that year, he can also claim the LTA exemption for that journey.

However, if Ravi fails to utilise his LTA in the block year, the remaining entitlement will typically lapse, and he won't be able to carry it forward to the next block. The unclaimed LTA will not be eligible for exemption in the subsequent block year.

Employees need to understand the specific block years defined by their employer or as per government regulations. This understanding helps them plan vacations and claim LTA exemption within the specified block period, optimising their entitlement and tax benefits.

What Happens to Your LTA if You Do Not Travel at All?

If you don't travel or fail to submit valid travel bills for LTA (Leave Travel Allowance), the LTA amount received will be added to your net taxable income. LTA is a part of your salary structure and is credited to your account regularly.

However, you cannot claim it for tax exemption without actual travel or proper proof. Therefore, the unutilised LTA will be treated as taxable income, potentially increasing your tax liability. It's important to ensure that you meet the necessary travel requirements and maintain proper documentation to avail yourself of the tax benefits associated with LTA.

Is a Domestic Travel Insurance Plan Advisable While Planning a Trip Next?

It is advisable to consider purchasing domestic travel insurance when planning your next trip within your country. While domestic travel may seem less risky compared to international travel, and this kind of travel plan may seem irrelevant as compared to international travel insurance, unforeseen events can still occur, and having travel insurance can provide valuable coverage and peace of mind.

Here are a few reasons why a domestic travel insurance policy is advisable

Trip Cancellation or Interruption Domestic travel insurance can cover trip cancellation or interruption due to unforeseen circumstances, such as sudden illness, accidents, or emergencies. Tata AIG's travel insurance plans typically reimburse non-refundable trip expenses in such cases.

Medical Expenses You may still encounter unexpected medical situations while travelling domestically. Domestic travel insurance can cover medical expenses incurred due to illnesses or accidents during your trip. Our travel policies include coverage for medical treatment, hospitalisation, and emergency medical evacuation.

Baggage Loss or Delay Domestic travel insurance plans can provide coverage for baggage loss, theft, or delay. This ensures you receive compensation for essential items if your baggage is lost or delayed during your trip. Tata AIG's travel insurance offers reimbursement for baggage loss or covers the costs of essential purchases due to baggage delay.

Personal Liability Domestic travel insurance may include personal liability coverage, protecting you against third-party claims for property damage or bodily injury caused unintentionally during your trip. We provide personal liability coverage, giving you peace of mind in such situations.

24/7 Assistance Tata AIG's travel insurance plans typically come with round-the-clock assistance services. Throughout your trip, you can access emergency assistance, such as medical advice, concierge services, or travel-related information.

**Apart from these reasons, if you purchase a travel plan with us, we are known for our efficient and hassle-free travel insurance claim settlement process. We will offer a streamlined claims procedure in case of any covered loss or emergency during your domestic trip.

Our dedicated claims team provides guidance and assistance throughout the claims process. And we aim to ensure you receive the support you need during challenging times.

To Sum It Up

Understanding the conditions and limitations behind claiming LTA (Leave Travel Allowance) is essential for employees seeking tax exemptions on their travel expenses. Simply put, LTA can only be claimed for domestic travel within specified block years, with restrictions on the number of journeys and eligible expenses. Proper documentation and adherence to employer policies are crucial for maximising the benefits of LTA.

Additionally, considering the purchase of domestic travel insurance from us provides an added layer of protection against unforeseen events during domestic trips.

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