Leave Travel Concession

Leave travel concession (LTC) is an allowance provided by an employer to facilitate an employee's travel expenses when on leave. It is a significant benefit as LTC is tax-exempt under the Income Tax Act, subject to certain conditions being fulfilled. This article delves into the exemption criteria and benefits under the Income Tax Act concerning leave travel concession.

Leave Travel Concession Eligibility

Employees receiving leave travel concession from their employer can enjoy income tax exemption when they and their families travel within India during their employment period. This privilege is available to employees meeting specific travel criteria.

Amount of Exemption for Leave Travel Concession

The maximum tax exemption for LTC should not surpass the actual incurred travel expenses. It is applicable only on travel fares, excluding costs on porterage, personal conveyance from home to travel starting point, boarding, lodging, or other incidental expenses. Additionally, the exemption is bounded by the following travel conditions:

Air Travel

When an employee and family travel by air, the tax exemption is capped at the economy class fare of the National Carrier for the shortest route to the destination.

Rail-Connected Origin & Destination

If both the journey's start and end are linked by rail and not traveled by air, the exemption is equivalent to the first-class air-conditioned rail fare by the shortest route.

Non-Rail-Connected Origin & Destination

For journeys where rail connectivity is absent:

If a public transport system is available, the exemption is limited to the 1st class or deluxe class fare for the shortest route.
Without available recognized public transport, it equates to the AC first-class rail fare for the shortest route as if traveled by rail.

Explore more about tax regulations in India, such as Section 147 of the Income Tax Act.

Claiming Leave Travel Allowance

Employees can claim LTC for two journeys in a four-year block. If not utilized within the block, one journey's exemption can be carried forward to the following year, subject to conditions. Without undertaking the journey, if LTC is encashed, it turns taxable.

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Family & Children

LTC covers fare expenses for family members and up to two children. 'Family' means:

Spouse and children of the employee. Post 1.10.1998, limited to two children, but exemptions exist for children born before this date or multiple births after one child.
Parents, brothers, sisters who are chiefly dependent on the employee.

Broaden your legal compliance knowledge with guides like the Transfer Pricing Certificate in India.

For more localized business support, explore services like Nidhi Company Registration in Bilaspur and ESI Registration in Haryana, or learn about GST Revocation.

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Frequently Asked Questions

Common questions about Leave Travel Concession Exemption in India.

Leave travel concession is an allowance provided by an employer to an employee to cover travel expenses incurred when the employee goes on leave. It is tax-exempt under the Income Tax Act, subject to certain conditions.

An employee is eligible for leave travel concession exemption when they and their family travel to any place in India during or after employment.

The amount of exemption should not exceed the actual travel expenditure, and it is allowed only for travel fare, not for other expenses like boarding, lodging, or conveyance.

If the travel is undertaken by air, the maximum exemption allowed is the air economy fare of the national carrier by the shortest route to the destination.

If the places are connected by rail and travel is by any mode other than air, the maximum exemption is limited to the air-conditioned first-class rail fare by the shortest route.

A taxpayer can claim leave travel concession for any two journeys in a block of 4 years.

If the exemption is not availed in a particular block, the first journey in the immediately succeeding calendar year can be carried forward and claimed for exemption.

Yes, leave travel concession can be claimed for travel expenses incurred on behalf of the employee's spouse, children, and dependent parents/siblings.

Up to two children are covered under leave travel concession, except for children born before 1.10.1998 and in case of multiple births after one child.

Yes, if leave travel concession is encashed without actually undertaking the journey, the entire amount received by the employee would be taxable.