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Exemption of leave travel allowance

CA Prashant Gupta 
on 05 September 2014

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Leave Travel Allowance or Leave Travel Concession is the allowance which is paid by company to its employees to meet expense of travelling within India. This is for employee and his family. This is tax free under section 10(5) read with rule 2B.

Features of Leave Travel Concession

Only amount of fare is exempt: while claiming LTA this point must be kept in mind that only travel expenses will be exempt. Other expense like hotel, food expenses etc are not exempt while claiming LTA.

Even Flight expenses can be claimed for exemption: Air fare, Train fare or any other public transport fare can be claimed. Air expense is allowed for economy class by national carrier by the shortest route to destination. Train travel can be claimed by first A.C. by the shortest route. All type of public transports are also allowed.

Within India travel allowed only: Leave Travel allowance can be claimed for travel within India only. Foreign travelling expenses are not allowed under section10 (5).

Exemption of actual expense only: as stated above, LTA is part of salary. So company can pay more LTA according to terms of employment but exemption will be of amount which is calculated as per section 10(5). For example: If company pay LTA of Rs. 90,000/- and your actual expense is only of Rs. 75,000/- then you can claim only Rs. 75,000/- as Leave Travel Concession, rest amount of Rs. 15,000/- will be taxable in employees hands. On the other hand, if your expense is Rs. 1,25,000/- then you can claim only Rs. 90,000/- because it is the amount of LTA.

Two time claim in four year block: LTA is exempt twice in the block of four years. This block is not depends on your joining date. Government has decided the blocks which started from 1st Jan 1986 to 31st Dec 1989. After that, a new four years block started. Presently block of 2014-17 is working which started from 1st Jan 2014 and will end on 31st Dec 2017.

LTA can be carry forward if not claimed: if you have not claimed or don’t want to claim LTA for a particular year then you can carry forward this exemption to next year. If you didn’t claim any travel in four years then in next block you can claim LTA in first year. It is valid only for one travel. It means you can claim three LTA exemptions in that four year block. It is also valid when you claimed only one leave travel concession in previous four years block then also one LTA exemption can be carried forward.

Some other points:

Job change doesn’t affect LTA exemption: if an employee is working in a company and after some time he shifted to other company without claiming LTA. He can claim both LTA exemptions in that 4 years block in other company. This is because, LTA exemption rules works on individual basis not on company basis.

LTA claim and LTA exemption is different: one LTA can be claimed every year by the employee as this is part of his salary but LTA exemption can be claimed twice only in four years block.

Proof of Travel is must: while claiming LTA an employee must produce proof of travel to the company. This proof can in shape of ticket of plane, train, or other public transport. Company can pay LTA without proof also but it will not be exempt then.

Without travel LTA will be taxable: as stated above, this is part of salary. So if LTA is paid by company and employee hasn’t traveled anywhere then full amount of LTA is taxable because exemption amount will be zero.


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CA Prashant Gupta 

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