LEAVE TRAVEL ALLOWANCE
The LTA is an reimbursement provided by the employer to the employee when the former submits original travel tickets / invoices that were used while the employee was on leave to fly with their families or alone.
The sum payable as LTA is tax-free. The LTA is one of the best tax-saving components which an employee can make use of.
LTA's Multifold Benefits Availing the LTA is beneficial to the mental well-being of workers because it allows them to take leave and spend more time for rejuvenation and work-life harmony with their families.
Encouraging earned / privilege leaves often benefits companies because they don't have to encash leaves on the departure or resignation of an employee, which can be extremely high in cases where workers use very little leaves!
Looking at the bigger picture, LTAs indirectly support the tourism and travel industry as more and more salaried individuals and their families travel during their annual leaves / holidays!
Maximum Claim Limits While the income tax authorities do not establish an upper limit for LTA, most organisations cap it for successful administration. The most common fixed upper limit for LTA is the monthly minimum salary of an employee.
RELATED POST: Specific allowances decoded LTA Restrictions As the name implies, the LTA exemption is limited to the employee's travel expenses only. It is not applicable for other expenses incurred during the travel, which may include expenses such as food , shopping and stay, etc. Block years definition An employee can claim for LTA for just two trips in a period of four years. Such block years are different from the financial years (they are calendar year based) and are provided by the Department of Income Tax.
Current Block for LTA Claims Next Block for LTA Claims 1 January 2014 — 31 December 2017 1 January 2018 — 31 December 2021 Within the current block an employee the claim LTA for two trips that took place between 2014 and 2017. However, if in the current year, the employee has not made any LTA claims, then under the current section, the exemption is transferred to the next year.
Also, if the current block does not claim an LTA exception, only one LTA claim can be carried forward to the next block's first year. The carry forward LTA exemption will be asserted for the next block in the first year itself.
The employee also can demand LTA in the same year for multiple travels.
Rules of Exemption A list of expenses exempted under LTA is given below: Air travel: Economy class airfare would be exempted by the shortest route or amount spent depending on which is less.
Train travel: A.C. The first-class fare would be deducted from the shortest route or the amount spent on travel, depending on the latter.
Location of origin and destination linked by rail but traveled by other means of transport Place of origin and destination not linked by rail (partially / partially) but connected by other recognized public transport system Place of origin and destination not connected by rail (partially / partially) and not connected by any other recognized public transport system as well.
Travel limits The travel limits applicable under LTA are specified below: they only cover domestic travel and do not cover international travel. It is because it was initially intended to promote domestic tourism and travel!
The mode of travel should be either air, rail, or some other public transportation type.
When claiming LTA The employee is advised to test his / her pay structure before considering claiming for LTA. However, if they are eligible for LTA, they will have to generate original tickets / bills according to the requirements, and apply the same to their employer.
Formal notice of the dates for LTA claims will be issued by each client. They will then have to fill up the appropriate paperwork, add the documents such as plane tickets, boarding passes, etc., and send them to their HR or account team. For proof of the travel, documents such for 'boarding passes' are required, tickets are typically not enough.
Employees will file their LTA claims before making the final tax obligation determination with their employers.
What if the amount claimed is less than the permissible amount?
If an employee is entitled to an LTA sum of INR 30,000 but has only reported INR 20,000, then the available LTA deduction will be INR 20,000 and the remaining INR 10,000 will be applied to his / her taxable income, which will be accountable for the tax liability.
Providing proof of LTA Employers do not normally have to give proof of LTA to tax authorities when evaluating claims of LTA. While employers are not allowed to obtain travel proof from the workers, they do have the right to request documentary evidence, if applicable.
The employee is recommended to retain proof of their travel such as boarding passes, flight tickets, travel agent invoice and other written documentation in case the appraising officer or the employer demands it.
Also, checking that the employee was on leave of absence for the period for which LTA is being reported is also relevant for HR.
Do you have any further questions concerning the LTA? Please post them in the Comments section and we will get back to you soon.
or Call us
The sum payable as LTA is tax-free. The LTA is one of the best tax-saving components which an employee can make use of.
LTA's Multifold Benefits Availing the LTA is beneficial to the mental well-being of workers because it allows them to take leave and spend more time for rejuvenation and work-life harmony with their families.
Encouraging earned / privilege leaves often benefits companies because they don't have to encash leaves on the departure or resignation of an employee, which can be extremely high in cases where workers use very little leaves!
Looking at the bigger picture, LTAs indirectly support the tourism and travel industry as more and more salaried individuals and their families travel during their annual leaves / holidays!
Maximum Claim Limits While the income tax authorities do not establish an upper limit for LTA, most organisations cap it for successful administration. The most common fixed upper limit for LTA is the monthly minimum salary of an employee.
RELATED POST: Specific allowances decoded LTA Restrictions As the name implies, the LTA exemption is limited to the employee's travel expenses only. It is not applicable for other expenses incurred during the travel, which may include expenses such as food , shopping and stay, etc. Block years definition An employee can claim for LTA for just two trips in a period of four years. Such block years are different from the financial years (they are calendar year based) and are provided by the Department of Income Tax.
Current Block for LTA Claims Next Block for LTA Claims 1 January 2014 — 31 December 2017 1 January 2018 — 31 December 2021 Within the current block an employee the claim LTA for two trips that took place between 2014 and 2017. However, if in the current year, the employee has not made any LTA claims, then under the current section, the exemption is transferred to the next year.
Also, if the current block does not claim an LTA exception, only one LTA claim can be carried forward to the next block's first year. The carry forward LTA exemption will be asserted for the next block in the first year itself.
The employee also can demand LTA in the same year for multiple travels.
Rules of Exemption A list of expenses exempted under LTA is given below: Air travel: Economy class airfare would be exempted by the shortest route or amount spent depending on which is less.
Train travel: A.C. The first-class fare would be deducted from the shortest route or the amount spent on travel, depending on the latter.
Location of origin and destination linked by rail but traveled by other means of transport Place of origin and destination not linked by rail (partially / partially) but connected by other recognized public transport system Place of origin and destination not connected by rail (partially / partially) and not connected by any other recognized public transport system as well.
Travel limits The travel limits applicable under LTA are specified below: they only cover domestic travel and do not cover international travel. It is because it was initially intended to promote domestic tourism and travel!
The mode of travel should be either air, rail, or some other public transportation type.
When claiming LTA The employee is advised to test his / her pay structure before considering claiming for LTA. However, if they are eligible for LTA, they will have to generate original tickets / bills according to the requirements, and apply the same to their employer.
Formal notice of the dates for LTA claims will be issued by each client. They will then have to fill up the appropriate paperwork, add the documents such as plane tickets, boarding passes, etc., and send them to their HR or account team. For proof of the travel, documents such for 'boarding passes' are required, tickets are typically not enough.
Employees will file their LTA claims before making the final tax obligation determination with their employers.
What if the amount claimed is less than the permissible amount?
If an employee is entitled to an LTA sum of INR 30,000 but has only reported INR 20,000, then the available LTA deduction will be INR 20,000 and the remaining INR 10,000 will be applied to his / her taxable income, which will be accountable for the tax liability.
Providing proof of LTA Employers do not normally have to give proof of LTA to tax authorities when evaluating claims of LTA. While employers are not allowed to obtain travel proof from the workers, they do have the right to request documentary evidence, if applicable.
The employee is recommended to retain proof of their travel such as boarding passes, flight tickets, travel agent invoice and other written documentation in case the appraising officer or the employer demands it.
Also, checking that the employee was on leave of absence for the period for which LTA is being reported is also relevant for HR.
Do you have any further questions concerning the LTA? Please post them in the Comments section and we will get back to you soon.
or Call us
