The Income-tax Act, 1961 offers salaried individuals several tax exemptions, beyond deductions like LIC premiums and housing loan interest. While deductions reduce your total taxable income, exemptions exclude specific types of income from being taxed altogether. This allows employers to design an employee's Cost to Company (CTC) package in a tax-efficient manner.
One such exemption available to the salaried class under the law and widely used by employers is Leave Travel Allowance (LTA)/Leave Travel Concession (LTC). LTA exemption is also available for LTA received from former employer w.r.t travel after the retirement of service or termination of service. LTA can be claimed for any two years in a block of 4 calendar years. The current block year for claiming LTA is 2022 to 2025.
Note: The tax exemption of leave travel allowance is not available in case you choose the new tax regime.
What is Leave Travel Allowance (LTA)?
Leave Travel Allowance/Leave Travel Concession is a type of allowance given by an employer to their employee for travelling to any place in India: either on leave, after retirement or after the termination of his service. Though it sounds simple, many factors need to be kept in mind before you plan to claim an LTA exemption. Income tax provision has laid down rules for claiming exemption of LTA which are provided below.
Note: The red arrow shows the lower of the two amounts will be exempted. For instance, if you travel by air, the exemption amount will be either your actual travel costs or the cost of an economy class ticket, whichever is lower. The journey should be taken through the shortest route to the destination.
Who Can Claim LTA?
Only individuals(citizens and non-citizens) can claim LTA for travel costs incurred for themselves and their family (Spouse, children, wholly or mainly dependent siblings, parents)
Conditions for Claiming LTA
Let us understand the conditions/requirements for claiming the exemption:
- is a must to claim the exemption
- Only domestic travel is considered for exemption, i.e., travel within India. No international travel is covered under LTA/LTC
- The exemption for travel is available for the employee alone or with his family, where ‘family’ includes the employee’s spouse, children and wholly or mainly dependent parents, brothers, and sisters of the employee.
- Further, such an exemption is not available for more than two children of an employee born after 1 October 1998. Children born before 1 October 1998 do not have any restrictions. Further, in cases of multiple births on a second occasion after having one child is also not affected by this restriction.
- Valid Proof of travel is essential to claim the exemption.
Amount of LTA/LTC Exemption
The exemption is available only on the actual travel costs i.e., the air, rail or bus fare incurred by the employee. No expenses such as local conveyance, sightseeing, hotel accommodation, food, etc., are eligible for this exemption. The exemption is also limited to LTA provided by the employer.
For example, if LTA granted by the employer is Rs 30,000, and the actual travel cost incurred by the employee is Rs 20,000, then only Rs 20,000 will be available as an exemption and the balance of Rs 10,000 would be included in taxable salary income.
Exemption w.r.t Various Modes of Transport
| Sl. No. | Journey through (Mode of travel) | Limit under LTA |
| 1. | Air | Lower of the following amounts: - Actual Expenses or - Economy class air fare of the national carrier(Indian Airlines or Air India) by the shortest route to the place of destination. |
| 2. | Any other mode: | |
| i) | Rail service is available | Lower of the following amounts: - Actual Expenses or - Air-conditioned first class rail fare by the shortest route to the place of destination |
| ii) | Rail service is not available | |
| a) | No recognised public transport system | Lower of the following amounts: - Actual Expenses or - 1st class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. |
| b) | Recognised public transport system exists | Lower of the following amounts: - Actual Expenses or - 1st class or deluxe class fare by the shortest route to the place of destination |
Can LTA Exemption be Claimed on Every Vacation?
No, an LTA exemption is available for only two journeys performed in a block of four calendar years.
Block Year
A block year is different from a financial year and is decided by the Government for LTA exemption purposes. It comprises 4 years each. The very first 4-year block commenced in 1986. The list of block years is 1986-1989, 1990-93, 1994-97, 1998-2001, 2002-05, 2006-09, 2010-13 and so on. The block applicable for the current period is 2022-25. The previous block was the calendar year 2018-21.
Carryover of Unclaimed LTA/LTC
In case an employee has not availed exemption with respect to one or two journeys in any of the block of 4 years, he is allowed to carryover one such unavailed LTC exemption to the next block provided he avails this benefit, in the first calendar year of the immediately succeeding block.
Consider the below example for a better understanding:
• Where carry over exemption is claimed in the first calendar year of the immediately succeeding block
| Particulars of journey | Block year 2014-17 | Block year 2018-21 |
| April 2015 | Exemption claimed in April 2015 | NA |
| June 2018 | NA | Exemption claimed in June 2018 (considered to be carried over from the previous block) |
| March 2020 | NA | Exemption claimed in March 2020 |
| January 2021 | NA | Exemption claimed in January 2021 |
• Where carry over exemption is not claimed in the first calendar year of the immediately succeeding block
| Particulars of journey | Block year 2014-17 | Block year 2018-21 |
| April 2015 | Exemption claimed in April 2015 | NA |
| June 2019 | NA | Exemption claimed in June 2019 (Can’t be considered to be carried over from the previous block as travel should have been performed in 2018 itself) |
| March 2020 | NA | Exemption claimed in March 2020 |
| January 2021 | NA | No exemption is available as two eligible journeys already claimed. (Maybe claimed by the working spouse of the employee receiving LTA) |
Procedure to Claim LTA
The procedure to claim LTA is generally employer specific. Every employer announces the due date within which LTA can be claimed by the employees and may require employees to submit proof of travel such as tickets, boarding pass, invoice provided by travel agent etc., along with the mandatory declaration. Though it is not mandatory for employers to collect proof of travel, it is always advisable for employees to keep copies for his/her records and also to submit them to the employer based on the LTA policy of the company to tax authorities on demand.
Multi-Destination Journey
Income tax provision provides exemption w.r.t travel cost incurred on leave to any place in India. Conditions pertaining to the mode of transport also refer to the place of ‘origin’ to the place of ‘destination’ and the route which must be the shortest available route.
Hence, if an employee travels to different places in a single vacation, the exemption can only be availed for the travel cost eligible from the place of origin to the farthest place in the vacation by the shortest possible route.
LTA Exemption for Vacation on Holidays
Many organisations that go strictly by the wordings of the income tax provision are allowing employees to claim LTA only if the employee applies for leaves and travel during that time. Such organisations may reject LTA claims for travel on official holidays or weekends.
Also read about:
Basic Salary
UAN Login
Last Date to File ITR
Section 115BAC of Income Tax Act
Income Tax Deductions List
How to e verify ITR
Annual Information Statement (AIS)
Section 80D
Home Loan Tax Benefit
House Rent Allowance (HRA)
Budget 2024 Highlights