An employee is entitled to LTA exemption under section 10(5) of Income Tax Act in respect of LTA received for himself and his family (spouse, children, dependant parents, dependant brothers and sisters) for traveling to any place in India.
The exemption is available for 2 journeys performed in a block of 4 calendar years. The current block is January 2014 to December2017.
Proofs to be submitted for LTA Exemption
Original Bills for travel as indicated below along with LTA claim form
- Travel by Air – Original Air Tickets along with Boarding Pass
- Travel by Train – Original Train Tickets
- Travel by Cab – Original Invoice for Car Hire, Trip Sheet, receipts for cash payments made.
The following points should be noted
- The leave travel should be to places within India for leave travel allowance exemption calculation. Overseas travel will not be considered for exemption calculation.
- Approved leave requisition must be on record of HR department.
- An employee receives payment under the head of “LTA” each month, however the tax exemption on the same is not available each An employee can claim tax exemption on the LTA amount twice in a “block of 4 years” only.
- In the event an employee does not claim tax exemption on LTA or claims tax exemption on LTA only once in a block of 4 years, the exemption can be carried forward and availed in the first year of the next block of 4 years. In such a case an employee could claim LTA exemption thrice in a block of 4 years.
- An employee has to travel in order to claim tax exemption on LTA. If an employee does not travel and consequently does not claim tax exemption, the LTA amount paid to employee will be fully taxable.
- The maximum LTA amount exempt for tax purpose cannot exceed the amount of expenses actually incurred for the purpose of travel.
- Travel expenses incurred for an employee’s family members can be considered for tax exemption. In addition, an employee’s parents, brothers and sisters can be considered as family if they are wholly dependent on the employee. Expenses towards food and lodging cannot be considered for tax exemption. Only travel expenses can be considered for tax exemption.
- The tax exemption of LTA shall be calculated as per the following guidelines:
|Mode of travel||Maximum extent of tax exemption|
|For journey performed by air||Air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination.|
|Where place of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than air||Air-conditioned first class rail fare by the shortest route to the place of destination.|
|Where place of origin of journey and destination or part thereof are not connected by rail||Where a recognised public transport system exists, the first class or deluxe class fare on such transport by the shortest route to the place of destination.
Where no recognised public transport system exists, the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey has been performed by rail