Income Tax efiling in India for FY 2023-24 (AY 2024-25)
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The Income Tax Act, 1961 provides for various exemptions from the paid class other than deductions such as LIC premiums, interest on mortgages etc. Although deduction is a deduction from all taxable income, exempt means deducting all taxable income. Such exemptions enable employers to arrange a Cost to Company (CTC) for employees in a tax-efficient manner. One such exemption available in the paid category under the law and which is widely used by employers is Leave Travel Allowance (LTA) / Leave Travel Concession (LTC). LTA exemptions are also available on LTA received on the employer's previous trip after the termination of service or termination of service.
What is Leave Travel Allowance (LTA)?
As the name itself suggests, it is an exemption from the benefits/assistance that an employee receives from his or her employer on leave. Although it sounds simple, many features need to be remembered before planning a trip in order to seek release from LTA. The provision of income tax has set rules regarding the requirement for exemption from the LTA.
Conditions for Claiming LTA
Let's understand the conditions / requirements for exemption.
- Real travel is a must for freedom
- Only home travel is considered free, that is, travel within India. No international travel covered under LTA
- Exemption from travel is available to the employee alone or with his or her family, where the ‘family’ includes the employee’s spouse, children, and fully or generally dependent parents, brothers, and sisters. In addition, such exemptions are not available for more than two employee children born after 1 October 1998. Children born before 1 October 1998 have no restrictions. In addition, in cases of second births after having one child they are also not affected by this limit.
Eligible LTA Exemption
Exemptions only apply to actual travel expenses, airfare, train or bus fare. There are no costs such as local transportation, accommodation, hotel accommodation, food, etc., which are eligible for this exemption. Exemptions are limited to LTA provided by the employer. For example, if the LTA provided to the employer is Rs 30,000 and the appropriate travel expenses incurred by the employee are Rs 20,000, exemption is only available at a rate of Rs 20,000 and a balance of Rs 10,000 will be included in taxable income. Exemption w.r.t various mode of transport
| Sl No | Scenario | Eligible exemption |
| 1 | Place of journey and destination are not connected by any recognized public transport system | The amount equivalent to the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey had been performed by rail. |
| 2 | Place of journey and destination are not connected by rail (partly/fully) but connected by other recognized public transport | The amount restricted to 1st class or deluxe class fare by the shortest route to the place of destination |
| 3 | Place of journey and destination are connected by rail | The amount spent for any mode of transport other than by air, restricted to air-conditioned first class rail fare by the shortest route to the place of destination |
| 4 | Journeys performed by air | The amount is restricted to the air economy fare of the national carrier(Indian Airlines or Air India) by the shortest route to the place of destination. |
Can LTA exemption be claimed on every vacation
No, LTA release is available on only two trips made on a four-year blockchain.
Block year
The block year is different from the financial year and is determined by the Government for the purposes of exemption from the LTA. It covers 4 years each. The first 4-year block started in 1986. The list of years of blockade is 1986-1989, 1990-93, 1994-97, 1998-2001, 2002-05, 2006-09, 2010-13 and so on. Active block for the current year 2018-21 calendar year. The previous block was the 2014-17 calendar year.
Carrying of Unwanted LTA
If an employee has not received a release for one or two trips on any 4-year block, he or she is allowed to transfer that release to the next block as long as he or she uses this benefit, in the first calendar year following the block. Consider the example below to better understand:
• Where carrier release is required in the first year of the next blockchain calendar
| 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 2022 | NA | Exemption claimed in January 2022 |
• When the overload release is not required in the first year of the next blockchain calendar
| Particulars of journey | Block year 2014-17 | Block year 2018-21 |
| April 2015 | Exemption claimed in April 2015 | NA |
| June 2019 | NA | Release is due 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 2022 | NA | No release is available as two eligible trips are already required.(Probably looking for a working partner for an LTA-receiving employee) |
• 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 2022 | NA | No exemption available as two eligible journeys already claimed. (Maybe claimed by the working spouse of the employee receiving LTA) |
Procedure to Claim LTA
The LTA claim process is usually employer-specific. Every employer announces a deadline on which the LTA may be required by employees and may require employees to submit travel documents such as tickets, boarding passes, invoices provided by the travel agent, etc., and mandatory declaration. Although it is not mandatory for employers to collect travel documents, it is always advisable for employees to keep copies of their records and submit them to the employer based on the company's LTA policy/tax authorities if required.
Multi-Destination journey
The provision of income tax provides holiday travel expenses to any destination in India. Transportation conditions also determine the ‘origin’ location of the ‘destination’ and the route that should be the shortest route available. Thus, if an employee travels to different destinations on the same holiday, exemption can only be achieved at the appropriate cost of travel from the source to the farthest vacation spot in the shortest possible route.
LTA Exemption for Vacation on Holidays
Many organizations that strictly adhere to the terms of the income tax plan allow employees to claim the LTA only if the employee applies for leave and leave immediately. Such organizations may reject LTA claims for official holiday or weekend travel.
Frequently asked questions
How much should I claim for Leave Travel Allowance or LTA?
What is the latest block period to claim LTA exemption?
How many trips can I make in one year to claim exemption?
Can I claim LTA benefit for travel costs of my family?
Krishna Gopal Varshney
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