Holidays are always welcome for the purpose of winding down, seeing new places or just cementing relationships. The Leave Travel Allowance (LTA) or Leave Travel Concession (LTC) is the ideal means to enjoy a vacation and gain financially too. Most employers provide such LTA to their employee as a part of the compensation package offered at the time of engagement. In additional to getting free money to bear the expense of your travel in the vacations such income is also eligible for tax exemptions making all it all the more lucrative option to exercise.
What is LTA?
The leave travel concession is basically an amount that the employer pays to the employee for travelling on leave along with his family. The amount thus paid is generally part of the overall pay package of the employee and is subject to partial tax exemption and covers the travel expenses exclusively. Other allied expenditure during a vacation such as accommodation and food do not form part of the LTA or LTC.
Who can Avail LTA?
Any employee of an organization can avail LTA provided the following conditions are fulfilled.
- The employee should have availed valid leave from the organization to proceed on that vacation.
- The employee should have actually performed the journey for which the LTA is being claimed. One can travel either alone or with family and make the claim likewise.
When can LTA be availed?
LTA may be available to any employee for every financial year however for the purpose of tax exemption an employee can avail LTA twice in a block of 4 years which is stipulated by the Government of India. The current block is 2010-2013. It must be noted that the blocks are decided by the government and correspond to calendar years and not financial years. The blocks do not commence with the engagement of an employee in an organization and is per the government stipulation. In case an employee fails to avail the LTA in a particular block then carry forward of the same is permitted to the first year of the following block of 4 years.
What is definition of Family for LTA?
For calculation of LTA claims the definition of family of the employee is as follows:
- The spouse and children of the employee.
- Parents, brothers, sisters of individual who are wholly or mainly dependent on the employee.
In case both the spouses are working then they both can claim LTA separately. However both the spouses cannot claim LTA for the same journey will have to make separate travels for which each is making the LTA claim. The underlying principle is that the same journey cannot be claimed by two different individual as LTA
How much can be Claimed for LTA?
The actual amount that has been expended is the basis of calculation of LTA provided it does not exceed the stipulated amount for that block of 4 years. The amount admissible for LTA is as described below:
- By Rail Route: The fare for first class AC travel is allowed but with a condition that journey has to be made through the shortest available route. Taking circuitous route will not be of any use as the reimbursement will only be for the shortest specified route between the two points.
- By Air Journey: Air fare for only economy class is allowed as benefit for employee through LTA.
- Other Modes of Travel: If any other mode for travelling is available and recognized by the government, such as the public bus, steamer etc then one can claim a rent equivalent to the first class rail journey.
In certain cases cash is also permitted in lieu of LTA benefit but this amount received from the employer is taxable. Additionally in case one cannot produce proof of travel expenses the payment towards LTA becomes fully taxable.
Tax Exemptions for LTA
The tax exemption on money received from the employer as LTA can be claimed for 2 travels in a block of 4 years. For example if an employee is eligible for LTA of RS 30000/- per annum then the maximum exemption that can be claimed in a block of 4 years is Rs. 60000/- irrespective of the number of travel performed of amount received from the employer for the travels. Even 2 exemptions not exceeding this amount can be made in the same year but no more exemption for LTA can then be claimed for the remaining portion of that block. If the LTA has been carried forward to the next block then the exemption can be claimed only in the first year of the succeeding block and not beyond that.
The LTA or LTC is one of the wonderful welfare measures that employers provide for their employees which provides an unique opportunity to travel with family on a vacation at the expense of the company and also avail tax exemption for the same.