Understanding LTA vs. LTC Reimbursement: What Are the Limits and Frequency Rules?

Hi,

I am a student currently pursuing my MBA and working on a compensation project. I would like to understand the variances between LTA and LTC reimbursement, including the specific limits for each and the frequency at which LTC can be reimbursed.

Regards,
Jenny

Usually, companies in India allot Rs 15,000 per annum towards Leave Travel Allowance. Since it is a part of Cost to Company, it is known as an allowance. The limit is fixed as per tax laws prevailing. Hope this info helps.

Hi Jenny,

I am a little confused about the differences between a LTA and an LTC. Could you please clarify the distinction between the two? Additionally, I would like to understand the general LTC reimbursement rules. Your help would be greatly appreciated.

Thank you.

As far as my knowledge goes, LTA is Leave Travel Allowance, which is given to the employee by the employer for traveling purposes. Generally, it is given once every four years.

LTC is Leave on Credit. Under this, for example, you can take 10 leaves in a year. Now, every company has its own rules. Let's say you took 4 leaves in the year, you are still left with 6. Now, if the financial year for which they are assigned ends, there are different options:

1. The remaining 6 leaves stand canceled.
2. They are credited to your next year account, so in the next year, you can have 6 + 10 leaves.
3. You can be reimbursed for the remaining 6 days.

Ekta

LTA = Leave Travel Allowance [Have given FAQs for the same]

LTC = Leave Travel Concession [Check this PDF, it is the ordinance LVII concerning Leave Travel Concession http://jmi.nic.in/Ordinance/57_LVII.pdf]

As far as the difference is concerned, both are the same with different names as the purpose is to give an allowance to the employees for taking vacations.

FAQs about LTA

Basically, it is a monetary benefit that you get on the expenses you incur when you travel.

Here's to clearing your doubts.

1. On what basis can I claim LTA?

If you fulfill two criteria, you can do so:

- You should have taken leave from your company
- You should actually travel

You can either travel alone or with your family. However, if your family travels without you, no LTA can be claimed.

2. How often can I claim LTA?

Twice in the block of four calendar years.

This block is not calculated with the start of your employment. The government defines these blocks.

Presently, the block is 2002-2005. Since it is the calendar year and not the financial year, it will be from January 1, 2002, to December 31, 2005.

3. What if I fail to avail of it?

In case you fail to do so, there is a carryover option.

Let's say that in the block of four years, you never did claim any LTA.

You can do so in the first year of the next block of four years.

4. What is the proof of travel to avail of LTA?

According to rule 2B, you can produce an air, rail, or any public transport ticket.

You can even submit the bills issued by the car rental company if you rent a vehicle.

However, the travel is applicable anywhere in India and not abroad. So an international air ticket will not hold.

5. Is LTA taxed?

You can receive LTA as either reimbursement or allowance.

Reimbursement:

In the case of LTA as reimbursement, it is not taxable.

Let's say your company offers an LTA of Rs 50,000. For proof of travel, you produce an air ticket of Rs 10,000.

In such a case, you can claim only Rs 10,000 as LTA, and it will be exempt from tax.

Allowance:

If you do not submit any proof of travel, you will get your LTA but will have to pay tax on it.

If you produce proof of travel, it will not be taxable to the extent your proof of travel is covered.

Let's say you are entitled to Rs 50,000 as LTA as part of your salary. Since you produced proof of travel as Rs 10,000, you will not be taxed on this amount. However, you will be taxed on the net Rs 40,000 as per your income tax slab rate.

LTA is not a fringe benefit as the latter are benefits that are usually enjoyed collectively by the employees and cannot be attributed to individual employees.

6. Can both spouses claim LTA?

If both spouses are getting the LTA benefit in their places of work, they can both claim exemption on LTA from their employers and the benefit for four journeys in one block.

They do not have to take the precaution of not traveling twice during the same year.

Moreover, they can take the same family members or different ones as long as they stick to the definition of the members for this purpose.

Family includes a spouse, children as well as dependent parents, brothers, and sisters. In respect of children born on or after October 1, 1998, the exemption will be restricted only to two surviving children unless the birth after one child has resulted in multiple births (twins or triplets).

7. If I and my wife travel this year, can we both claim LTA simultaneously?

No. You cannot claim LTA twice for the same journey. If both of you take a holiday together and you claim LTA, she cannot.

8. If I am entitled to a particular amount as LTA, but my expenses are higher, can I claim more?

Say in the year 2005-06, you receive only Rs 8,000 as LTA, but spend Rs 50,000 on travel. You can claim exemption only to the tune of Rs 8,000.

For LTC check the LTC ordinance at http://jmi.nic.in/Ordinance/57_LVII.pdf

Hi Ajmal,

The reply given by you was so simple and very informative. Please let me know some more things on LTA:

1. Is the company obligated to pay LTA?
2. If yes, should it register itself in any of the government bodies [something like PF]?
3. If no, and as an employee, I want to avail of this benefit, is there anything that I can do.

Regards,
Soumya Shankar

Ajmal,

Can you kindly shed some light on Fringe Benefit Tax? How is it going to affect employees? What's the hitch for the employers? How to plan and restructure salary, etc.?

Also, could you please provide me with a template for payroll purposes? I need to process payroll for the startup I work with, and I also want to generate pay slips.

Help me with both, please.

Gayathri

Hi Somya,

Sorry for the delay in replying. I am working on an urgent project and am not able to get sufficient time for replying here. But by next week things should be smoother.

1. No, the company is not obligated to pay LTA as per Indian law, but generally, companies having branches in different geographies and/or having a large number of employees from outside the state do provide LTA which is then mainly used to visit the hometown.

3. To avail of this benefit, talk with your HR team and see if something can be added to your compensation structure. Many IT companies in Bangalore offer a flexible compensation structure wherein you can pick your own benefits, limited to a fixed CTC.

Hi Som,

In addition to the Ajmal's reply, I want to add a few points. However, Ajmal's reply is 100% correct. As mentioned, LTA (Leave Travel Allowance) should or should not be a part of your CTC depending on the company's policy because it is a taxable amount. Some companies provide 10/15/20% of your basic as your LTA.

LTC is partially provided by the company, and the remaining amount is borne by the individual. This also varies based on the company's policy. To get more information on this, you should check with the HR/Admin Department.

Thank you, Kamal and Ajmal,

Both of your replies have cleared my doubts. However, could you explain why a company would be willing to cover my holiday expenses?

Also, I am unable to approach the HR or the Admin Dept. directly as I am part of that department.

Regards,
Soumya Shankar

Both your replies have cleared my doubts. But tell me one more thing, as to why would a company like to bear my holiday expenses?

One more thing, I cannot ask the HR or the Admin Dept., because I belong to that dept.

Regards, Soumya Shankar

Some companies feel that if the employee takes a vacation every year, his productivity might increase as he may feel revitalized. However, most companies provide this benefit because it has traditionally become a part of the compensation in the industry. Some companies design their own packages to match the compensation package with that of the competitor/industry to attract and retain the best talent.

Family under LTC means parents and 2 children. So, if the parents go alone for a tour and the employee and his spouse go for another tour separately, in the same block, can this be claimed for LTC?

In other words, if the employee's family goes alone (without the employee) for a tour, can the employee claim LTC?

Hi,

As asked, if the employee's family goes without the employee, can he claim LTA? The answer is no, unless the employee goes with his/her family, he can't claim the LTA.

Hi all,

I have a query regarding LTA. I would like to know whether you can avail tax-exempted LTA twice in a block of four years as per the law, and if it is the same for all companies or if different companies can have different policies. Can it be claimed as tax-exempt every year upon producing proof of travel?

Also, if one can claim tax-exempted LTA twice in a block of four years, can it be claimed in consecutive years or does it have to be alternated? For example, if you claim tax-exempted LTA in the first year of the block, can tax-exempted LTA be claimed again the next year?

Please help me by answering the above queries. I need more clarity regarding LTA.

Best Regards,
Simran

LTA can be claimed twice in a block of 4 years, and this rule is the same for all companies. Even the blocks are fixed. The current block is 2010-2013. Also, LTA eligibility is based on the calendar year (Jan to Dec) and not the financial year.

LTA can be claimed in consecutive years; alternate years are not required, but you cannot claim LTA twice in the same year. Also, in case you have claimed only once in a block of 4 years, that can be carried forward (i.e., you can claim LTA thrice in the next block), but the carried forward balance should be used in the first year of the new block. I hope that answers your query.