LTA - LTC (Leave Travel Allowance - Concession) in Brief
Leave Travel concession is exempted u/s 10(5).
Leave Travel Allowance (LTA) is an allowance/benefit that your employer gives you to cover your travel expenses. This is a tax saving instrument as well. Your employer gives you money to go on vacation and the money is not taxable!
1. On what basis can I claim LTA?
If you fulfill two criteria, you can do so:
i. You should have taken leave from your company
ii. You should actually travel
iii. Your CTC structure should contain LTA
You can either travel alone or with your family. However, if your family travels without you, no LTA can be claimed.
2. How often can I claim LTA?
Twice in the block of four calendar years.
This block is not calculated with the start of your employment. The government defines these blocks.
Presently the block is 2010-2013. Since it is the calendar year and not the financial year, it will be from January 1, 2010 to December 31, 2013.
3. What if I fail to avail of it?
In case you fail to do so, there is a carryover option.
Let's say that in the block of four years, you never did claim any LTA.
You can do so in the first year of the next block of four years.
4. What is the proof of travel to avail of LTA?
Journey performed by Air - Economy Air fare of National carrier by the shortest route or the amount spent whichever is less will be exempt
Journey performed by Rail – A.C. first class rail fare by shortest route or amount spent whichever is less will be exempt.
Place of origin and destination place of journey connected by rail but journey performed by other mode of transport - A.C. first class rail fare by shortest route or amount spent whichever is less.
Place of origin & destination not connected by rail (partly/fully) but connected by other recognised Public transport system - First class or deluxe class fare by shortest route or amount spent whichever is less.
Place of origin & destination not connected by rail (partly/fully) and not connected by other recognised Public transport system also – AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent, whichever is less.
However, the travel is applicable anywhere in India and not abroad. So an international air ticket will not hold.
Recently Supreme Court has held in the case of Larsen & Toubro and ITI that employers are under no statutory obligation to collect bills and details to prove that the employees had utilised the amounts obtained against these claims on travel and related expenses.
Employers while assessing the travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on its policy. The Judgement of Supreme Court has only moved the responsibility from the employer to the employee, the assessing officer can still ask for the employee to provide details of travel.
The individual however needs to keep copies for his or her own records. Such proofs are helpful at the time of the audit of the tax return of the individual. Proof of travel could be, for example, tickets,boarding passes, invoice of travel agent, duty slip etc .
5. Is LTA taxed?
You can receive LTA as either reimbursement or allowance.
In case of LTA as reimbursement, it is not taxable.
Let's say your company offers an LTA of Rs 50,000. For proof of travel, you produce an air ticket of Rs 10,000.
In such a case, you can claim only Rs 10,000 as LTA and it will be exempt from tax.
If you do not submit any proof of travel, you will get your LTA but will have to pay tax on it.
If you produce proof of travel, it will not be taxable to the extent your proof of travel is covered.
Let's say you are entitled to Rs 50,000 as LTA as part of your salary. Since you produced proof of travel as Rs 10,000, you will not be taxed on this amount. However you will be taxed on the net Rs 40,000 as per your income tax slab rate.
Exemption is allowed only for fare only as explained above .Other expenses like Local conveyance charges, lodging, boarding charges is not exempted.
6. Can both spouses claim LTA?
If both spouses are getting the LTA benefit in their places of work, they can both claim exemption on LTA from their employers and the benefit for four journeys in one block.
They do not have to take the precaution of not travelling twice during the same year.
Moreover, they can take the same family members or different ones as long as they stick to the definition of the members for this purpose.
Family includes spouse, children as well as dependent parents, brothers and sisters. In respect of children born on or after October 1, 1998, the exemption will be restricted only to two surviving children unless the birth after one child has resulted in multiple births (twins or triplets).
7. If I and my wife travel this year, can we both claim LTA simultaneously?
No. You cannot claim LTA twice for the same journey. If both of you take a holiday together and you claim LTA, she cannot.
8. If I am entitled to a particular amount as LTA, but my expenses are higher, can I claim more?
Say in the year 2010-13, you receive on Rs 30,000 as LTA, but spend Rs 40,000 on travel. You can claim exemption only to the tune of Rs 30,000.
9. LTA received post retirement is exempt?
LTC/LTA received from employer or former employer received in connection with proceeding to any place in India after retirement/termination for himself and his family is also exempted