Are Travel Expenses Tax Deductible?
- Author :
- TATA AIG Team
- Published on :
Salaried employees are eligible for several tax exemptions under the Income-tax Act of 1961. One of these exemptions is a leave travel allowance or LTA. Travel benefits are among the most common benefits private and public sector companies offer their employees.
Employees get a leave travel allowance for travel expenses and get a tax exemption up to a certain limit under Section 10(5) of the Income Tax Act. That only reimburses an employee's commuting expenses. This is not the same as the transport allowance exemption limit for salaried employees, which is ₹1,600 per month or ₹19,200 per annum (as on March 2023).
So if you are wondering, "Is travel allowance taxable?", the answer is that you can deduct LTA from your taxable income as an exemption. However, only the amount of travel expenses you spend can be claimed under an exemption and not the amount you receive from your organisation/employer.
What Is Leave Travel Allowance?
Employees get a leave travel allowance as a benefit from their employers. It covers any expenses related to travel. However, only the expenses incurred when travelling anywhere within India are covered as tax deductibles.
Your travelling allowance exemption is the allowance paid by your employer to cover your travelling expenses while travelling during your leave, with or without your family. Your LTA is included as a part of your CTC and is given as a yearly benefit, but it can also be used monthly.
You can use your LTA from your employer or ex-employer (if you're retired) to
- Cover the expenses incurred while travelling during your leave from work.
- Cover the costs incurred when travelling after your retirement or termination of services.
Furthermore, combining your LTA exemption in income tax and the benefits of a travel insurance plan can save you money in the long run. In contrast, when travelling overseas, an international travel insurance plan can help cover any emergency medical expenses that may arise during your trip.
Claiming An LTA Exemption In Income Tax
Employees working in public or private sectors can claim a travel allowance income tax exemption under Section 10, 14(i) of the Income Tax Act of 1961.
This section states that "an allowance received by the employee that is given to meet expenses totally and necessary for the performance of official duties (generally called 'Per Diems'), for the expenses that he has already/has to incur, are exempted from taxes."
In simple terms, the exclusion is offered based on the total amount of the allowance and the amount used by the employee during travel.
For example, if the LTA granted by the employer is ₹30,000, and the travel cost incurred is ₹20,000. The exemption would only be for the ₹20,000. The remaining ₹10,000 would be considered taxable salary income.
The procedure itself is specific to the employee's organisation. Every company has its own due dates, and to claim an LTA exemption, the employee may be requested to submit proof of travel. This can include invoices and bills incurred for the trip. Not all organisations will request proof of travel, but it's best to keep and maintain a proper paper trail just in case.
Who Is Eligible To Claim An LTA Exemption In Income Tax?
The travel tax exemption is covered under the Old Tax Regime of the Income Tax Act of 1961. It may sound simple enough, but there are a few things to keep in mind when claiming a deduction:
- The employee must be on leave to qualify for LTA exemption in income tax.
- The exemption does not include the amount spent on hotel accommodation, shopping, or food. It only covers the travelling expenses.
- International travel is not included under the travelling allowance exemption.
- The exemption can be claimed only by the individual employee alone or with their family (spouse, children, parents, and in-laws).
- This exemption is unavailable for employees with more than two children born after 1st October, 1998.
- Employees can only claim the exemption by providing documentary proof of their expenses, such as tickets, boarding passes, etc., and a prescribed declaration form.
How Frequently Can Someone Claim A Travelling Allowance Exemption?
An employee can claim an LTA expense exemption for only two journeys during a block of four calendar years. The government decides the block year (two years starting 1st January of an even year to 31st December of an odd year), and this is different from the financial year.
Here's a closer look at how these exemptions are granted based on the mode of travel:
|Mode of Travel||Eligibility of exemption|
|The destination is not connected by any publicly recognised transport system.||An amount equivalent to a first-class AC train fare for the distance of the journey. In other words, it would cost as much as a first-class AC train ticket that provides the shortest route to your destination.|
|The destination is not connected fully by rail but is connected by other recognised public transport.||It would cost a first-class or deluxe-class train fare with the shortest route to your destination.|
|The present location and destination are both connected by rail.||The fare for any mode of transportation other than air. The amount is restricted to a first-class AC train ticket with the shortest route to your destination.|
A leave travel allowance is a benefit afforded to employees by their companies. Employees are eligible for tax exemptions for their travel expenses under Section 10, 14(i) of the Income Tax Act of 1961, provided they fulfil certain conditions.
Lastly, this exemption is only applicable for travel expenses incurred when travelling within the borders of India. A leave travel allowance and transport allowance are not the same. When travelling to another city, you need to have a travel insurance plan with you that will secure you against emergencies. Tata AIG offers a range of domestic as well as international travel insurance plans at reasonable premiums that you can calculate on the official website.
Domestic travel insurance plans allow you to safeguard your trip from unforeseen risks so that you can have a safe journey. When you want to file a travel insurance claim with us from anywhere in India, you can swift assistance with any issues you may face during your travels!
Frequently Asked Questions (FAQs)
1.How do you claim an exemption if you travel to multiple places?
Suppose you travel to different places during a single vacation. In that case, the LTA exemption covers the travel cost from the starting destination to the farthest destination through the shortest available route.
2. Are there LTA exemptions for travel on public holidays?
Most organisations follow the details of the income tax provisions down to the last letter. So, they may reject LTA claims for travel expenses incurred during official holidays or weekends.
3. What happens if an employee does not make use of their LTA?
If an employee does not use their LTA exemption for one or two journeys within the block of four years, they can carry it over to the following year's block, provided they use this benefit within the first year of the next block.
Disclaimer / TnC
Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.