We go on travel with our families; if we can get tax benefits, why waste it. This article on leave travel allowance is focused on the taxability and some other interesting points which a salaried employee must keep in mind. Have you claimed LTA? Leave Travel Allowance (LTA) is the most common type of compensation adopted by employers to remunerate employees due to the tax benefits attached to it. 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. Amount from LTA is tax free. Section 10(5) of the Income-Tax Act, 1961, which provides for the exemption and outlines the conditions subject to which LTA is exempt.

Leave travel allowance is basically the cost of travel allowed to employee to travel anywhere in India only in respect of travel cost incurred by the employee. It is allowed twice in a block of four calendar years.

2002 – 2005

2006 – 2009

2010 – 2013

2014 – 2017

2018 – 2021

And so on. The current block is 2014-17. So, for the period 2014-17 one can claim this exemption for any two occasions.

Points to be considered:

1) LTA is allowed in respect of fare.

2) LTA can only be claimed if you have applied for leave from your company for travel and if you actual make a journey.

3) LTA excludes the cost of accommodation, food etc.

4) LTA covers on domestic travels. International travels are not permitted.

5) LTA exemption is limited i.e. one can claim exemption for LTA to the extent of amount paid to him by the employee and exemption can be claimed upto the amount spent by him. For instance if employer grants you Rs. 25000 for travel and the actually expenses incurred is Rs.20000. So, you claim maximum Rs.20000 as exemption under LTA provision and the remaining Rs.5000 gets taxable.

6) If Employee and his spouse are working under the same employee then they both can claim LTA but not for the same journey.

7) LTA can be claimed if the employee has actually travelled.

8) In case the employee has not claimed the LTA for a particular period block then he can carry forward it to the next period hence he can claim exemption for 4 journeys during that period.

9) LTA exemption covers both you and your family. A family includes:

  • Dependent parents, sister and brother.
  • Spouse of the employee.
  • Two surviving children of the employee after 1.10.1998.

10) If LTA is encashed to you and you don’t perform the journey then you cannot claim the exemption then whole amount will get taxable.

 

How we can claim exemption?

You must give a written declaration to your employer with travel details and the amount spent. As per the Supreme Court, if you submit a declaration stating the amount you spent, you don’t need to give the actual bills. But it is recommended you keep the tickets handy in case your employer or the tax authorities such as Assessing Officer need to see it later or to satisfy themselves about the genuineness of the claim. Your employer will certify the LTA exemption in Form 16.

How to treat LTA in case we switch job?

In case we switch jobs we can claim LTA from both the employer only if you don’t utilized all the two LTA during the previous employer.

Which travels are covered under LTA?

Exemption will be availed subject to the following:

 

  • Journey is performed by air:  amount not exceeding air economy fare of the national carrier by the shortest route to the place of destination will be exempt.
  • Journey is performed by rail: amount not exceeding AC first class rail fare by the shortest route to the place of destination will be exempt.
  • Place of origin and destination of journey is connected by rail but journey is performed by any mode of transport: amount not exceeding AC first class rail fare by the shortest route to the place of destination will be exempt.
  • Place of origin and destination of journey are not connected by rail (partly/fully)  and the  journey is performed between such places: amount not exceeding 1st class or deluxe class fare (if recognised public transport system exist) , A.C. first class rail fare ( if no recognised public transport system exist) by the shortest route to the place of destination will be exempt.

 

Bare Act portion of the provision:

Section 10(5) In the case of an individual, the value of any travel concession or assistance received by, or due to, him,—

 (a)  From his employer for himself and his family, in connection with his proceeding on leave to any place in India;

 (b)  from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,

Subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government:

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.

Explanation.—for the purposes of this clause, "family", in relation to an individual, means—

 (i)  The spouse and children of the individual; and

 (ii) The parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual;

Rule 2B prescribes the conditions as well as quantum of exemption, which are as follows:

Conditions to be satisfied - Conditions to be satisfied are as under:

♦ The exemption is admissible on the value of any travel concession or assistance received by or due to an assessee from his employer or former employer, as the case may be, for himself and his family, in connection with his proceeding (i) on leave to any place in India, or (ii) to any place in India after the retirement from service, or (iii) to any place in India after the termination of his service.

♦ The exemption is admissible in respect of actual expenditure incurred for journeys performed, not only by the assessee but also by his family.

For this purpose, 'family' means (i) the spouse and children of the assessee, and (ii) the parents, brothers and sisters of the assessee provided that they are wholly or mainly dependent on the assessee. With effect from 1-10-1997, the Central Civil Service Leave Travel Concession Rules have been amended in this respect.

♦ The exemption can be availed only in respect of two journeys performed in a block of four calendar years. For this purpose, the first four-year block commenced with the calendar year 1986. Thus, the four-year blocks will be 1986-89, 1990-93, 1994-97, 1998-2001, 2002-05, 2006-09 and so on.

♦ If an assessee has not availed travel concession or assistance during any of the specified four-year block periods on one of the two permitted occasions, or on both occasions, exemption can be claimed provided he avails the concession or assistance in the calendar year immediately following that block. This is popularly known as the 'carry-over' concession. In such cases, the exemption so availed will not be counted for purposes of regulating the future exemptions allowable for the succeeding block of four years.

Quantum of exemption.—The basic rule is that the quantum of exemption will be limited to the actual expenses incurred on the journey. This pre-supposes that, without performing any journey and incurring expenses thereon, no exemption can be claimed.

In addition to the above general limitation, the quantum of exemption will also be subject to the following maximum limits, depending upon the mode of transport used or available:

JOURNEYS PERFORMED ON OR AFTER 1-10-1997

 ■  For journeys 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 by 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

■ (i) 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.

(ii) 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.

Restricted concession for children.—Under sub-rule (4) of rule 2B, inserted with effect from 1-10-1997, exemption on travel concession will not be admissible to more than two surviving children of an individual born after 1-10-1998. This restriction will not however apply in respect of children born before 1-10-1998, and also in cases where an individual, after getting one child, begets multiple children (twins/triplets/quadruplets, etc.) on the second occasion. The implications of this restriction will be as follows:

   ♦ In respect of journeys performed on or before 1-10-1998 exemption will be admissible in respect of all the surviving children of the individual.

    ♦ In respect of journeys performed after 1-10-1998

    - The exemption will be admissible to all surviving children born before 1-10-1998;

   - In addition, the exemption will be admissible to only two surviving children born on or after 1-10-1998. In reckoning this limit of two children, children born out of multiple birth after the first child will be treated as 'one child' only.

It may be noted that section 2(15B) of the Act defines a 'child' as includes 'a step-child and an adopted child of the individual'. Hence the aforesaid restrictions will operate in respect of step-children and adopted children also provided they are born on or after 1-10-1998.

 

For any query you can write to Chirag@cachauhan.in Before making any decisions do consult your Professional / tax advisor. For misrepresentation or interpretation of act or rules Author does not take any responsibility. Neither the author nor the firm accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on.

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Posted On:  1 year ago

How much % of tax charged if eligible amount of LTA is not claimed.


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CA Chirag Chauhan

Tax Expert
Chartered Accountant, CA Chauhan



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    I hope by reading this article you got enlighten on ,Leave travel allowance section 10(5) under the Income tax act 1961Leave travel allowance section 10(5) under the Income tax act 1961, Block of years for LTA, Points to be considered while taking exemption of LTA, What are conditions to claim LTA ?, When LTA can be claimed ?, LTA covers on domestic travels ?, LTA on International travel not allowed ?, LTA can be claimed if the employee has actually travelled, How we can claim exemption for LTA?, How to treat LTA in case we switch job?, Which travels are covered under LTA?, Bare Act portion of the provision on LTA, Leave travel allowance section 10(5) under the Income tax act 1961, further to mention before taken any financial decision based on this content it is prefered to take an expert opinion as matter can be subjective.