Leave Travel Allowance, or LTA, is one of the best tax-saving tools available to salaried employees, provided by employers to facilitate their travel purposes. This allowance can be utilised for vacations, whether taken alone or with family.
However, to claim reimbursement, employees must provide authentic receipts to the employer. The LTA amount varies depending on the employer and the employee’s position within the organisation. Under Section 10(5) of the Income Tax Act, 1961, with rule number 2B, the LTA received is exempted from tax up to a predetermined limit. Any amount exceeding this limit is subject to taxation according to the applicable income tax slab rates.
Leave Travel Allowance is usually a part of your salary. Expenditures for family members accompanying the employee also qualify for exemption. However, LTA does not extend to the accommodation or food costs incurred during the travel. Salaried employees can claim a tax exemption for the expenses incurred during two journeys taken in a block of four calendar years.
Conditions for claiming LTA
Employee status and LTA Component: The individual must be an employee and should have an LTA component in his/her cost-to-company (CTC) package.
Actual journey requirement: The employee must undertake the journey to claim the exemption. Mere intention to travel without actually doing so doesn’t qualify.
Domestic travel only: LTA covers only domestic travel within India. International travel expenses are not eligible for exemption.
Eligible family members: The exemption for travel expenses is applicable for the employee alone or with their family. ‘Family’ includes the employee’s spouse, children, and wholly or mainly dependent parents, brothers, and sisters. However, there are restrictions for children born after 1st October 1998. Exemption is limited to a maximum of two children born after this date. Children born before this date are not subject to any such restrictions. Additionally, in cases of multiple births on a second occasion after having one child, this restriction doesn’t apply.
How to claim LTAÂ
Verify your eligibility: Ensure that you meet the criteria for LTA and have fulfilled the necessary tenure requirements with your employer. Familiarise yourself with the specific LTA rules and guidelines established by your employer.
Plan your trip: Strategise your travel arrangements in advance and decide on the preferred mode of transportation. Gather all pertinent travel documentation, including tickets, boarding passes, and receipts.
Apply for LTA: Complete the LTA application form provided by the employer, furnishing all details of your journey, including travel dates, destination, mode of travel, and associated expenses.
Provide evidence of travel: Alongside your application, submit substantiating documents such as tickets, boarding passes, and invoices to validate your LTA claim. These records serve as crucial evidence for processing your claim.
Await approval and reimbursement: Your employer will review your LTA application, and upon approval, will reimburse the claimed amount in accordance with their policies. Reimbursement may be integrated into your regular salary or disbursed separately.
Documents needed to claim LTA
- Original travel receipts, such as bus or train tickets
- If you are travelling to a destination by road, provide original invoices from a car rental agency in case of car hire
- For air travel, include original air tickets and boarding passes
- Share bank statements, credit/ debit card statements, or e-wallet transaction records indicating payment for travel expenses
- Submit all LTA-related documents to your employer during the same financial year, as claiming them later during Income Tax Return (ITR) filing can be difficult.
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