LTA - Leave Travel Allowance

Taxability of Leave Travel Allowance (LTA) under section 10(5) of Income Tax (IT) Act:

LTA is an allowance paid by the employer to its employees for travelling, may be alone or with family. Such amount paid by the employer is treated tax free. The exemption of tax and the details of conditions subject to tax exemption are ensured by rule 2B of section 10(5) of the IT Act, 1961. The section also includes rules related to exemption of tax.

LTA Exemption:

  • By air the travel must have been completed by economy class. The travel should have been done by the shortest route least amount spent on the same (whichever is lesser), will be eligible for exemption.
  • By rail, the travel must have been completed in AC first class from shortest route, or least amount spent on travel (whichever is lesser), will be eligible for exemption.
  • Original and destinations connected or not by the railway and by other recognized modes of transport, partially or fully, the amount spent is generally available under LTA exemption.
  • The same is applicable for origin and destinations connected by rail; however, the journey is completed by other recognized modes of transport.

Providing proof of LTA:

Traveling employees are advised to keep proper proofs of their travel like tickets, boarding passes, travel agent invoices, duty passes or any other type of documentary proofs, etc, for any instance of demand by the employer or assessing officer.

LTA restrictions:

Certain restrictions related to LTA are stated below:

  • One can travel only in India
  • Proofs related to travel must be kept for possible future enquiries
  • LTA can be claimed only twice in the span of four years
  • Family of the employee is also covered in LTA exemption
  • LTA exemption is applicable only for travelling expenses
  • For more than two children born after October1, 1998, LTA exemption is not available