What is LTA? – Eligibility Criteria, Process, Calculation, & More

Introduced in 1986, the LTA scheme was initially rolled out for the government and public sector undertaking employees in India. Later, private sector employees were included in it too. Since then a number of employees have utilized the LTA scheme for their travel expenses. If you are a salaried employee going on leave soon, make sure you are well-versed with LTA.

This blog will help you understand what is LTA, the eligibility criteria to claim it, the procedure, conditions, and documents required, and even the restrictions and benefits of LTA.

What is Leave Travel Allowance (LTA) in Salary?

Leave Travel Allowance or LTA is an allowance that employers pay to their employees when the latter is on leave and traveling, either alone or with family within India. The amount paid to the employee as LTA is tax-free subject to certain conditions. 

The conditions and amount of the leave travel allowance are given in Section 10(5) of the Income Tax Act, 1961 along with Rule 2B of Income Tax Rules. It is important to note that employees who have opted for the new tax regime are not eligible to claim LTA. Learn personal finance to expand your knowledge on taxation and savings to manage your finances better.

Eligibility Criteria for LTA Exemption

The eligibility criteria that the employees must meet to claim leave travel allowance are as follows:

• The exemption is for salaried employees who have incurred expenses on travel. 
• The travel destination must be within India since international travel is not included in the exemption.
• Only those employees who have taken a leave from work for the purpose of travel can make an LTA claim. 
• Employees can claim LTA for a maximum of two journeys undertaken in a block of four calendar years. The current block of travel is from 2022 to 2025.
• Employees should possess proof of travel expenses in the form of boarding passes, hotel bills, etc. 
• LTA exemption can be claimed only within the specified period, after which it is deemed to lapse. 

Procedure to Claim LTA

The procedure to claim LTA is simple. Follow these steps to claim LTA in salary:

• Check Your Eligibility- Ensure you are eligible to claim LTA according to your employer’s policies as well. There is a minimum number of years of service requirement, specified by the employer before you can claim any exemption. Hence, check it before applying for LTA. 
• Plan Your Travel- To avoid any last-minute problems, make sure to plan your travel and keep proof of every travel expense, especially the tickets and the boarding passes. 
• Apply for LTA- In the LTA application form provided by the employer, fill out all the details such as date of travel, mode of travel, destination, costs incurred, number of family members, etc.
• Attach Relevant Proof Documents- Attach the travel proofs that you have collected with your LTA application. 
• Await Approval and Reimbursement- Now all you have to do is wait for your LTA claim application to be approved and then the reimbursement. Employers can either combine the LTA allowance with the salary or as a separate payment for reimbursement.

NOTE: An important point that the employees should keep in mind is that if only one LTA is claimed out of two within the block year, then the employee can claim the unused one in the next block. But this travel journey has to be made in the first calendar year of the next block, after which the unutilized LTA will expire. 

Documents Required for LTA Claim

The following are the documents required to be submitted by salaried employees to their employers:

• Travel tickets (for train, road, or air)
• Proof of expenses such as boarding passes, hotel bills, cab receipts, etc. 
• Leave approval application showing that the leave was taken to travel.
• LTA form duly filled in by the employee, detailing the exempt amount being claimed. It is provided by the employer. 
• Travel itinerary that outlines the places traveled and the duration of travel.
• PAN card details of the employee are to be provided to the employer. 
• Bank account details for receiving reimbursement for travel expenses.

Conditions for Claiming LTA

There are certain conditions that the employees must fulfill to claim LTA. These are as follows:

• The employee must actually travel to claim LTA.
• The family members covered under the rules are spouses, children, dependent parents, and dependent siblings. They must be traveling with the employee and not separately.
• The salary structure of the employee must contain LTA components.
• Only two children born on or after 1st October 1998 are covered under the exemption. There is no restriction regarding children born before this date. 
• The LTA claim can be made for any mode of travel, that is, by road, train, or air. 

LTA Exemption Rules for Various Modes of Transport

LTA covers the various modes of transport for travel. Refer to the given table to understand the exemption rules for different modes of transport:

Sno.	Case	Exemption
1.	When the place of origin and destination is connected by trains	The exemption cost is the fare of a first-class AC train ticket for the shortest route. It is regardless of whether the journey has been covered by the train or not.
2.	When an employee travels by air	The exempted amount is the airfare of the economy class of the national carrier for the shortest route to the destination.
3.	When the place of origin and destination are not connected by recognized public transport	The exempted amount is the first-class AC ticket fare of the shortest route possible to the destination by train, assuming the journey was done by train.
4.	When the place of origin and destination are not connected by trains but by other recognized public transports	The exempted fare would be the first class or deluxe class fare of the shortest route possible to the destination.

How is LTA Calculated?

Here are the steps followed to calculate the LTA:

• First employee’s eligibility is checked based on the conditions prescribed in the employer’s policy and IncomeTax Act,1961.
• Then the cost of travel for the employee and their family members is calculated. 
• Now the maximum LTA exemption is calculated. The calculation is based on the fare for the shortest route to the destination by economy class of the national carrier. 
• Note that if the cost of travel is less than the maximum LTA calculated, then an exemption can be claimed for the actual cost of travel.
• But if the cost of travel is more than the maximum LTA calculated, then an amount only up to the maximum LTA exempt amount can be claimed. The excesses can be claimed as taxable income. 
• Once we have the final amount after all the calculations, the exemption amount is deducted from the employee’s taxable income.

LTA Claim Restrictions

Though LTA is a beneficial tax exemption for employees, there are certain restrictions as well. These are:

• LTA can be claimed only for domestic travel, that is, within the country, and not on international travel.
• The number of times you can claim LTA is limited. 
• Employees need to maintain proof of travel which can be a task for some.
• LTA exemption covers only the actual travel expenses and not the other expenses such as hotel accommodation and food bills. 
• No LTA can be claimed can be made on cash payments. You will only get an LTA allowance on payments made through bank accounts online, cheques, or any digital payment mode. 

Benefits of LTA

The following are some important benefits of LTA in salary:

• LTA is an essential source of saving tax.
• It encourages tourism and aids the travel industry.
• It also helps in cost optimization as the employees do not have to spend much. They also plan to keep in mind the allowance they will receive and the best options they have for other expenses. 
• LTA plays a role in maintaining the work-life balance as the employees can travel with their families and spend some time with them. 
• The LTA exemption claim is also flexible as it includes the travel expenses of the accompanying family members as well. Also, you can choose the mode of travel according to your requirement since all three–train, air, and road are covered under LTA. 

Conclusion

We have discussed what is LTA, the eligibility to receive LTA allowance, the procedure to claim LTA, the documents required, the conditions to be met, how it is calculated, and the restrictions and benefits of LTA. All of this information will help you in proceeding with your LTA application comfortably.