Understanding Leave Travel Allowance: Eligibility, Limits, and Reimbursement Components?

Hello,

I have some queries regarding LTA (Leave Travel Allowance). Does it have any maximum limit? Also, who is eligible for LTA? Does LTA differ from company to company?

I would also like to know about the components for reimbursement that a company can provide to its employees. Kindly help me in this regard.

Regards,
Shweta

Dear Mr. Khola,

Thank you very much for your reply. I have one more question regarding the same matter. If LTA is not required to be paid under any statute, and management can establish its own policy regarding LTA, is it possible for management to also deny providing LTA?

To the best of my knowledge, LTA is not dependent on the start date of employment. The government sets blocks of years, which are based on calendar years (January 1 to December 31) rather than financial years (April 1 to March 31). Therefore, if I have traveled and desire to claim, can I do so? Or is it necessary that I can only claim if my company has a provision for LTA reimbursement?

Regards,
Shweta

Dear Shewta,

Once management frames any policy for the employees and also declares it effective or applicable from a specific date, then the beneficiaries become entitled to receive this benefit as a term and condition of employment. Thereafter, the employer cannot deny it. If the management has not included this term in the appointment letter and there is no policy in place, then why should the employer provide this benefit to the employees?

Regards,
R.N.Khola

Dear Swetha,

Please refer to the link for more details on LTA.

Regards,
R. Ponraj

Dear All,

As rightly pointed out, LTA is not a statutory payment to be made to employees. Generally, companies frame LTA rules as a policy, and as per this policy, the employee can avail LTA benefits. But there is a legal provision under the IT act. The broad guidelines are:

1. Once the LTA is applicable to an employee, it becomes exempt from tax if the employee claims it twice in a block of 4 years, and the block started, if my memory is right, from 1998-2001, 2002-2005, 2006-2009, 2010-2013, and so on.
2. In the above case, for example, if the employee claims LTA in 2011 & 2013, then it becomes exempt from tax provided he produces evidence for having undertaken the travel.
3. He has to compulsorily be on leave (as he is on LTA tour) during the period of LTA leave. If by chance he reports for work and tries to create evidence that he was on tour, then the LTA paid will be taxable by the employer.
4. Please note that the expenses incurred by the employee will be permitted only to the extent of travel and will not include boarding and lodging.
5. To the best of my knowledge, there is no specific definition of family. It can include father, mother, spouse, children, etc.
6. On the other hand, the employee can claim LTA amount each year, and the same becomes taxable as per the IT act.
7. The LTA amount fixation varies from company to company. Some companies fix an ad hoc amount, and some others link it up either with Basic + DA or Gross salary.

Trust I have clarified the matter to the extent possible.

Regards,

M.V. KANNAN

The employer benefits from paying the LTC to its employees in several ways. Firstly, the leave credited to an employee is utilized. Secondly, the leave costs the employer at the current salary rate. Thirdly, the employee is pleased that the employer has arranged for their and their family's recreation and welfare. Fourthly, the employer receives Income Tax benefits. Fifthly, it enhances the company's brand, making employment in that organization more prestigious. Sixthly, employees' minds remain proactive, reducing engagement in unwanted activities. Seventhly, the tours and travel industry prospers, contributing to the country's GDP. Additionally, there are numerous other direct and indirect advantages. LTC/A proves to be a win-win situation for the employers.