Exemption in Respect of Leave Travel Allowance

What is LTA?

Leave travel allowance (LTA) is a common form of tax exemption given to the employees by most employers. An LTA is the remuneration paid by an employer for employee’s travel in the country, when he is on leave with the family or alone. LTA amount is tax free. Section 10(5) of the income-tax act, 1961, provides for the exemption and outlines the conditions subject to which LTA is exempt.

When LTA exemption can be claimed?

LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in india taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. The total cost of the holidays is not covered, only the travelling cost is covered. Travel has to be undertaken within india and overseas destinations are not covered for exemption. Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay etc.

Meaning of family :

The meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you. Further, exemption is not available for more than two children of an individual born after October 01, 1998.

Is exemption available every year?

No.

The tax rules provide for an exemption only in respect of two journeys performed in a block of four calendar years. The current block runs from 2014-2017. If an individual does not use their exemption during any block on any one or on both occasions, their exemption can be carried over to the next block and used in the calendar year immediately following that block.

In such cases, the journey performed to claim such exemption will not be counted for the purposes of regulating future exemptions allowable for the succeeding block.

For example,

Mr. X joins an organisation on April 1, 2012 and is entitled to a LTA of rs 30,000 per annum (financial year 2012-13).

X undertook a journey in December 2012 and used his exemption. However, for his LTA entitlement for 2013-14, he did not undertake a journey during the calendar year 2013.

He can undertake the journey in 2014 to claim the exemption in relation to the LTA. He would also be able to use the LTA benefit for two other journeys which he can undertake in the current block 2014-17 in relation to his LTA entitlement for future years.

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