Leave Travel Allowance

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Leave Travel Allowance

In order to cover the travel expenses incurred by the employee at the time of leave, Leave Travel Allowance (LTA), also known as Leave Travel Concession (LTC), is provided by an employer to employees. Exemption from tax towards leave travel allowance is being provided under Section 10 (5) of the Income Tax Act, 1961 read with rule 2B of the Income Tax Rules which is being explained in the present article.

Amount of Leave Travel Allowance Exempt from Tax

Basic provisions of exemption available under leave travel allowance are contained in section 10 (5) of the Income Tax Act, 1961.

As per the said section 10 (5) –

The individual receiving the value of leave travel allowance/concession, for himself and his family, from his employer / his former employer shall be exempt up to an amount actually incurred on such travel in respect of –

  1. Leave to any place in India;
  2. To any place in India after retirement or after termination of service.

It should be noted that family means spouse and children of the individual and also includes parents, brothers and sisters of the individual who is wholly or mainly dependent on the individual.

Conditions for Availing Leave Travel Allowance Exemption

  1. In case of the journey by air, the amount of exemption shall not exceed the economy class fare available by the shortest route to the place of destination;
  2. In case the journey is not performed by air and the places of origin and place of destination of the journey is connected by rail, the amount of exemption shall not exceed the air-conditioned first class rail fare by the shortest route to the place of destination; and
  3. In case the place of origin and the place of destination or part thereof is not connected with rail, in such case, the amount of exemption shall be –
  4. Cases, wherein, recognized public transport system exists – exemption would be an amount not exceeding first class / deluxe class fare.
  5. Cases, wherein, recognized public transport system doesn’t exist – exemption would be an amount equivalent to the air-conditioned first class rail fare, assuming that the journey has been performed by rail.

Limit of Exemption

The exemption under section 10 (5) is available to an individual in respect of 2 journeys performed in a block of 4 calendar years. The current block is 2018-2021 i.e. in the block of 2018-2010, the individual can claim exemption in respect of 2 journeys.

Carry Forward of Exemption

In case the individual doesn’t avail exemption of leave travel allowance/concession during any block of four years, then, the amount in respect of the value of leave travel allowance/concession first availed during the calendar year, immediately succeeding the block of four years, shall be eligible for exemption.

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