Understanding LTA Exemption Limits: How Much Can You Save on Income Tax?

LTA Exemption Under Income Tax

Up to what limit is the LTA exempted under Income Tax (e.g., in Rupees)? For example, if one person's base is ₹45,000/- and their LTA is ₹90,000/- yearly, is it allowed by Income Tax?

Regards,
Raj

As per my knowledge, the Leave Travel Allowance (LTA) is exempted up to Rs. 15,000 per year, i.e., Rs. 1,250 per month, and is also deemed non-taxable for 2 times in a 4-year period.

Thanks and regards,

LTA Exemption Details

LTA (Leave Travel Allowance) has no limit as per the Income Tax law under section 10(5) rule (2b). Any person can avail of this facility two times in a block of 4 years. The current block is 2010 - 13. Specific rules need to be followed to get the benefit.

Travel should be performed by the employee or the employee and his family together. Family means spouse, children, dependent parents, brothers, and sisters.

Leave for a minimum of 3 working days is required to be taken.

LTA claims should be approved by HR (Leave confirmation).

The opted amount will be withheld from the monthly salary and reimbursed upon submission of bills.

Exemption is available in respect of travel to any one place within India by the shortest route. The exemption is available only towards travel fare and does not include any other expenses.

Regards,
Suneel.

In fact, if we look precisely, LTA is Leave Travel Allowance, and it is fully taxable under the Income Tax Act as it is a fixed allowance. However, LTC is exempt under section 10(5). There are plenty of rules and conditions prescribed to avail such exemption, as described above by Suneel. But I have never come across any specific limit of exemption for LTC as stated above by some members. I believe it is tax-free up to the amount actually spent by the employee with proofs submitted (subject to other conditions fulfillment).

Regards,
Rajiv

LTA (Leave Travel Allowance) is a perk that is given by the company to an employee, and this is usually taken at the end of the year, typically in December. This facility is available to the employee and their family members, i.e., spouse and children. All expenses related to this are taken care of by the company, subject to the limit, and the employee producing proof of the expense.

As per my knowledge, this would be treated as a perk and be taxable. Please correct me if I am wrong.

Thanks,
Raj

Understanding LTA and LTC

LTA stands for Local Travel Allowance.

LTC stands for Leave Travel Concession.

If you mean something else by the acronym LTA, please clarify. If you mean Leave Travel Allowance (or Leave Travel Concession), then income tax exemption is limited to Air Economy or AC1 to the shortest route, subject to submission of documentary evidence and the number of family members eligible, etc. There is no restriction on the amount that can be paid under this head. The amount paid minus the actual spent on the traveling ticket is taxable as per the slab. This concession is allowed twice in a block of four years.

If you mean Local Travel Allowance, then the daily rate of Rs 50.00 for actual attendance is exempt. The latest daily rate value needs rechecking.

Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B, provides for the exemption and outlines the conditions subject to which LTA is exempt.

Exemption of Fare Only

LTA exemption can be claimed where the employer provides LTA to an employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. Travel has to be undertaken within India, and overseas destinations are not covered for exemption.

Exemption on Actual Expense

For example, where an employer provides LTA of Rs 25,000, but an employee spends only Rs 20,000 on the travel cost, then the exemption is limited to only Rs 20,000. Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay, etc.

The meaning of 'family' for the purposes of exemption includes a spouse, children, and parents, brothers, and sisters who are wholly or mainly dependent on you. An individual would not be able to claim the exemption in relation to their parents, brothers, or sisters unless they are wholly or mainly dependent on the individual. Further, exemption is not available for more than two children of an individual born after October 01, 1998. This restriction does not apply in respect of children born before this date, and also in cases where an individual, after having one child, begets multiple children (twins, triplets, quadruplets, etc.) on the second occasion. The term 'Child' includes a step-child and an adopted child of the individual.

Amount Exempted

1. Journey performed by Air - Economy Airfare of National carrier by the shortest route or the amount spent, whichever is less, will be exempt.

2. Journey performed by Rail – A.C. first-class rail fare by the shortest route or the amount spent, whichever is less, will be exempt.

3. Place of origin and destination place of journey connected by rail but journey performed by another mode of transport - A.C. first-class rail fare by the shortest route or the amount spent, whichever is less.

4. Place of origin & destination not connected by rail (partly/fully) but connected by other recognized public transport system - First class or deluxe class fare by the shortest route or the amount spent, whichever is less.

5. Place of origin & destination not connected by rail (partly/fully) and not connected by other recognized public transport system also – A.C. first-class rail fare by the shortest route (as if the journey had been performed by rail) or the amount actually spent, whichever is less.

LTA Exemption Details

LTA (Leave Travel Allowance) has no limit as per the Income Tax law under section 10(5) rule (2b). Any person can avail of this facility two times in a block of 4 years. The current block is 2010 - 13. Specific rules need to be followed to get the benefit.

Travel should be performed by the employee or his family together. Family means spouse, children, dependent parents, brothers, and sisters.

A minimum of 3 working days of leave must be taken.

Exemption is available for travel to any one place within India or abroad upon producing the original bills for travel. If you travel by air, you need to produce the ticket as well as the boarding pass of the traveler. If you travel by car, you need to produce the original bill, trip sheet, and toll gate tickets (in originals). However, LTA will be calculated based on the shortest route and 3-tier train rates.

This benefit is advantageous for the employee in terms of saving some amount on income tax.

Regards,
Harsha

I think some people are getting confused between Medical Reimbursement and LTA. For Medical Reimbursement, the limit is ₹15,000 per annum. However, for LTA, there is no fixed limit; it can be a set amount (e.g., 2 months of basic salary * 12 per annum) provided by the employer and ultimately part of your CTC breakup. Correct me if I am wrong...

Proof of Travel

Recently, the Supreme Court held in the case of Larsen & Toubro and ITI that employers are under no statutory obligation to collect bills and details to prove that employees had utilized the amounts obtained against these claims on travel and related expenses.

Employers, while assessing travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on their policy. The judgment of the Supreme Court has only shifted the responsibility from the employer to the employee; the assessing officer can still ask the employee to provide details of travel.

However, individuals need to keep copies for their own records. Such proofs are helpful at the time of the audit of the tax return of the individual. Proof of travel could include, for example, tickets, boarding passes, invoices from travel agents, duty slips, etc.

During the Fringe Benefit Tax (FBT) regime, the provision of paid holidays, including travel costs to any place, stay expenses, etc., were subject to FBT in the hands of employers and were not taxable in the hands of individuals. Many employers extended the paid holiday benefit instead of LTA.

Now, with the elimination of FBT, effective from April 1, 2009, the paid holiday benefit is fully taxable in the hands of employees, and therefore, employers are reintroducing the LTA element by withdrawing the paid holidays benefit.

Thank you, Harsha. As I understand, the question was "Up to what limit is Leave Travel Allowance exempt from Income Tax?" The answer is the actual expenses paid by a person on travel tickets and fulfilling other criteria and eligibility.

There is no limitation on the amount a company can pay its employee under Leave Travel Concession. However, the amount paid to a person exceeding the actual expenses is taxable in the hands of that person.

Hello everyone,

If I get a gross salary of 12000/-, am I eligible for LTA or not?