Leave Travel Allowance - Exemptions, Claiming, Benefits & FAQs

Introduction

Leave Travel Allowance (LTA) is a benefit provided by employers to salaried employees to cover domestic travel expenses while on leave. Under the Income‑tax Act, 1961, it provides a tax exemption, subject to conditions under Section 10(5). The travel must be within India and must be for the employee and their eligible family members. The exemption applies only to the cost of travel (air, train, or bus) and not to costs such as accommodation, food, or local sightseeing. There is also a “block” period rule: an employee may claim the exemption twice in a block of four calendar years. However, it is available only under the older tax regime if you opt for the new regime, you lose this benefit.

What is Leave Travel Allowance (LTA)?

LTA (also called Leave Travel Concession – LTC) is an allowance component in salary for travel expenses incurred while the employee is on leave. It is exempt from tax up to certain limits under Section 10(5) of the Income‑tax Act. The idea is to encourage domestic travel and provide employees with a tax‑efficient way to cover travel.

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Who is Eligible to Claim LTA?

To claim LTA exemption:

• The employee must have the LTA benefit included in the salary package from employer.
• The travel must be within India (international travel is not eligible).
• The journey must actually be undertaken by the employee (and family) during leave.
• Eligible family members typically include spouse, children, and wholly or mainly dependent parents, siblings.
• The exemption is available only under the old tax regime (Section 115BAC new regime does not allow this).

What Travel & Costs are Covered?

Item

Covered / Not Covered

Details

Travel by air, train, bus

Covered

Exemption on actual cost or prescribed fare whichever is lower.

Accommodation / food / local sightseeing

Not Covered

Only travel cost qualifies.

Domestic destination only

Covered

Within India.

International travel

Not Covered

No exemption.

Shortest route principle

Covered

For multiple destinations, only route to farthest destination counts.

Family travel

Covered

Employee + spouse + children + dependent parents/siblings.

Key Rules, Limits & Block Period

• The exemption is available for two journeys in a block of four calendar years. Current block: 2022‑2025.
• If you don’t claim in one block, you may carry forward one unused journey to the first year of the next block.
• Under the new tax regime, LTA exemption is not available.
• The exemption is limited to actual cost incurred or the allowance paid (whichever is lower).
• For travel by air: economy class fare of the national carrier by shortest route or actual travel cost.
• For rail: first class AC fare by shortest route or actual cost.
• For other modes: if rail not available, deluxe bus or recognised public transport cost or first class AC rail fare whichever is lower.

How to Claim LTA – Step by Step

1. Plan your eligible travel within India (employee + eligible family members).
2. Keep original travel tickets, boarding passes, invoices etc.
3. Submit your claim to your employer before the employer’s deadline with travel proof and a declaration (often Form 12BB or company form).
4. Employer reviews, verifies your travel and claims and computes the exempt portion
5. While filing ITR under old regime, ensure the exempt portion has been excluded from taxable salary and you keep proof ready for scrutiny.

Benefits of LTA

• Reduces taxable income for salaried employees when they travel and meet conditions.
• Encourages domestic travel and family vacation with tax benefit.
• If managed well (two journeys in block), can lead to substantial tax savings.
• Serves as part of a compensation strategy for employees.

Summary of Eligibility & Conditions

Rule

Details

Domestic travel only

Travel must be within India.

Eligible persons

Employee + spouse + children + dependent parents/siblings.

Travel cost only

Only airfare/rail/bus cost counts. No meals/accommodation.

Block of 4 yrs

2 journeys allowed in each 4‑year block (e.g. 2022‑25).

New tax regime

LTA exemption not available under new regime.

Shortest route principle

If multi‑city, fare to farthest city via shortest route taken.

Conclusion

Leave Travel Allowance (LTA) remains a valuable tax‑saving benefit for salaried employees who travel within India. By understanding the eligibility, block‑period rule, cost limits, and submission process you can make the most of this allowance. If your employer provides LTA, plan your travel well, keep all supporting documents, and claim the exemption under the older tax regime for maximum benefit. Make sure to consult your company policy and coordinate with your payroll or tax department to ensure smooth submission and accurate tax treatment.