Understanding LTA: Can I Accumulate Leave Travel Allowance Over 4 Years Without Claiming?

Dear Sir/Madam, My salary is not taxable (Rs. 2,40,000/- P.A), but still, the employer has added the LTA component to my CTC. My per annum LTA component is Rs. 6000/-. As I know, one can claim LTA twice in a block of 4 years (DOJ - 15.07.2016).

LTA Claim Eligibility

My question is, if I don't claim LTA even once in the coming 4 years, am I eligible to get the complete Rs. 24,000/- added to my salary?

LTA Claim for Multiple Years

Secondly, if an employee claims LTA in 2019, is he eligible to claim Rs. 6000 x 3 = Rs. 18,000 (for all 3 years), or can he only claim Rs. 6000/- for that particular year only? Please help me clarify this doubt.

Regards, Supriya

Hi,

It's in response to your LTA query. I think this may vary from company to company. For better understanding, please refer to the HR policy of your company.

Supriya, I agree with Yogesh that LTA rules will be as per your company's HR policy. However, as per Income Tax rules, you can claim LTA twice in a block of 4 years. As per your LTA eligibility, you should be able to claim Rs. 12,000/- as LTA every 2 years. I do not think you can accumulate for 4 years and claim at once; then it could be taxable, or you get an exemption of Rs. 12,000/- as LTA and the balance Rs. 12,000/- taxable. However, this will depend on your company's HR policy. Best of luck.

CTC stands for Cost to Company every year. So, you should be getting that money paid to you as it's considered a cost to the company. The taxability of it is immaterial to you as you are below the taxable limit. Therefore, you should claim the amount each year. However, many companies use CTC as a tool to deceive employees into thinking their earnings are higher than what they are actually being paid. Your company may have designed this to deny you the money. Therefore, you need to ask your HR.

Ms. Supriya,

Irrespective of IT coverage, designing components for salary is the company's policy. If you want to accumulate it for two to four years, check what is stated in the LTA policy of the company; otherwise, avail it then and there.

V. Murali

Understanding LTA in Salary Structure

LTA is not a statutory component; hence, the employer is not bound to include the LTA component in the salary structure predominantly. Its aim is to provide tax benefits to employees. Furthermore, the LTA component and payment thereof are subject to your service agreement. However, no exemption under income tax can be granted unless the salary structure includes the LTA component. Only two journeys within India are permitted in one block. If an employee has not availed any journey in the existing block, then only one journey can be carried forward to the next block, which is mandatory to avail in the first year of the next block. As per CBDT Circular 8/2013 dated 10/10/2013, the exemption is limited to actual expenses incurred on airfare, train fare, and bus fare. No other expenses like local conveyance, ticket booking expenses, etc., are admissible for deduction under Section 10(5) of the Income Tax Act, 1961.

Thanks & Regards,

V. Shakya HR & Labour, Corporate Laws Advisor

Dear Supriya, I have gone through the article today. Though the experienced members have explained the matter in detail regarding company policy towards the payment of LTA and IT Rule for taking the LTA, I would just like to add that the current block period is ending in 2017. The Income Tax rebate against LTA for the block period 2014-2017 can be availed by taking LTA up to December 2017. As your income is not taxable, I advise taking LTA for the years 2016 and 2017 together. This is because, even if you don’t submit the details (LTA Declaration) of actual expenses of your travel, there will be no tax deduction. Suppose next year you get a good opportunity and are supposed to shift immediately into a new job, then your existing employer will pay all accumulated LTA amounts with F&F. Since you will have little (almost nil) time to avail of the LTA period (in general, for taking LTA, employees have to take continuous PL for 3-5 days; in my company, it is 5 days), in that case, the total amount of LTA will be counted as taxable income with your new employer.

By taking LTA with a low IT slab, you will avoid preparing unnecessary documents (taxi bills, distance calculation, travel declaration details, etc.).

I have given this suggestion keeping in view the practical problems in LTA declaration to make it tax-free.

I hope now all your points are clear. Fellow members can provide more input on the matter.

Understanding LTA Structure

First and foremost, let us know one fact. How is your LTA facility structured? Is it paid in cash either in a block of two years or four years, or every year to your hometown, irrespective of whether you undertake the journey or not? Or are expenses reimbursed?

Travel Expenses and Reimbursement

On the other hand, in respect of the other category - travel expenses (only to and fro fare as per eligibility), excluding accommodation, local travel, food expenses, etc., are reimbursed subject to eligibility for the trips undertaken either to your hometown or anywhere in India/abroad. Different types of facilities are in vogue with establishments. Some establishments don't bother much about the genuineness of whether the trip is undertaken or not; they reimburse the eligible money based on mere certification with a view to ensure the availability of employees on duty instead of increasing the work pressure by granting leave travel. Some employers compulsorily encourage employees to be sent on leave travel to enable them to refresh and enjoy days away from work pressure.

Taxability of LTA

The taxability of LTA should be examined based on the HR policy with regard to LTA as an allowance paid in cash or expenses reimbursed on actual claim subject to limits.

For further information on this, please refer to the following links:
- https://www.citehr.com/161811-lta-exemption-tax.html
- https://www.citehr.com/1425-differen...leave-pg2.html