Leave Travel Allowance (LTA) is provided by an employer to cover an employee’s travel expenses, usually for a vacation. As per Section 10(5) of the Income Tax Act, LTA is exempt from tax if specific conditions are met. This exemption also applies to LTA received from a past employer for travel undertaken after retirement or termination of employment.
An employee can claim LTA for any two journeys in a block of four calendar years. The current block period is 2022–2025. However, LTA exemption is not applicable if you opt for the new tax regime.
What is Leave Travel Allowance (LTA)?
Under the Income Tax Act, Leave Travel Allowance (also called Leave Travel Concession) is an allowance provided by an employer to employees for travel within India.
It can be claimed while on leave, after retirement, or after the end of employment.
Who is Eligible to Claim LTA?
LTA can only be claimed by individuals (both residents and non-residents) for expenses incurred on travel for themselves and their family, which includes:
- Spouse
- Children
- Dependent parents
- Dependent brothers and sisters
Conditions for Claiming LTA
The following rules must be satisfied to claim exemption:
- Only domestic travel is eligible. Foreign trips are not covered.
- Exemption applies to travel by the employee alone or with family.
- Exemption is limited to two children of the employee. In case twins are born after the first child, the restriction does not apply (LTA can be claimed for all three children).
- Proof of travel is mandatory.
- The exemption covers only the cost of travel tickets.
- Expenses on accommodation, food, or other costs are not allowed.
LTA/LTC Exemption
The exemption is restricted only to the actual travel expenses incurred by the employee, such as air, rail, or bus fares.
Other costs like local transportation, sightseeing, hotel stay, meals, or similar expenses are not eligible for exemption.
The exemption is also limited to the amount of allowance provided by the employer.
For instance, if an employer grants LTA of ₹30,000 but the employee spends only ₹20,000 on travel, then the exemption is restricted to ₹20,000. The remaining ₹10,000 will be added to taxable salary.
Exemption Based on Mode of Travel
- Air Travel
Exemption is limited to the lower of:
- Actual travel expenses, or
- Economy class airfare of the national carrier (Air India or Indian Airlines) on the shortest route to the destination.
- Actual travel expenses, or
- Other Modes of Travel
- If rail service is available:
Exemption is the lower of:
- Actual expenses, or
- AC first-class rail fare for the shortest route.
- Actual expenses, or
- If rail service is not available:
- When no recognized public transport exists:
Lower of:
- Actual expenses, or
- First-class rail fare (for the equivalent distance by the shortest route, as if the journey were made by rail).
- Actual expenses, or
- When recognized public transport exists:
Lower of:
- Actual expenses, or
- First-class or deluxe fare for the shortest route to the destination.
- Actual expenses, or
- When no recognized public transport exists:
- If rail service is available:
Can LTA Exemption Be Availed on Every Trip?
No. Exemption under LTA can be claimed for only two journeys in one block of four calendar years.
Block Year for LTA
A block year is not the same as a financial year. It is a four-calendar-year period decided by the Government for LTA purposes.
The ongoing block is 2022–2025.
Carry Forward of Unused LTA/LTC
If an employee does not claim exemption for one or both journeys during a block of four years, they can carry forward one unclaimed exemption to the next block.
However, the carried forward exemption must be utilized in the first year of the next block.
Example for Better Understanding of Carry Forward Exemption
Case 1: When carry forward exemption is claimed in the first year of the next block
| Journey Month | Block Year 2018–21 | Block Year 2022–25 |
| April 2019 | Exemption claimed | NA |
| March 2021 | Exemption not claimed | Carried forward to the next block |
| May 2022 | No journey undertaken | Exemption from the previous block can be claimed in FY 2022–23 |
Case 2: When carry forward exemption is not claimed in the first year of the next block
| Journey Month | Block Year 2018–21 | Block Year 2022–25 |
| April 2019 | Exemption claimed | NA |
| June 2019 | Exemption claimed | NA |
| March 2021 | Exemption not claimed | Carried forward |
| January 2022 | No journey undertaken | NA |
| January 2023 | No journey undertaken | Exemption for March 2021 cannot be claimed since the first year of the next block has already passed |
Procedure to Claim LTA
The process of claiming LTA depends on the employer’s internal policy. Generally, employers specify a deadline by which employees must submit their claim. Employees may be required to provide:
- Travel tickets
- Boarding passes
- Invoice from the travel agent
- A declaration form
Although employers are not legally required to collect travel proofs, employees are strongly advised to retain copies of all documents. These may be needed for submission to the employer (as per company LTA policy) or to the tax authorities if demanded.
Note: The exemption is always based on the lower of the two amounts – either the actual travel expense incurred or the eligible fare (for example, the cost of an economy class air ticket). Also, the journey must be undertaken using the shortest route to the destination.
Multi-Destination Journey
According to the provisions of the Income Tax Act, LTA exemption is calculated only on the shortest route from the starting point to the farthest destination.
Therefore, if an employee’s trip covers two or more destinations, only the distance up to the farthest point will be considered for exemption. The entire travel cost for all destinations cannot be claimed.
LTA Exemption for Vacations on Holidays
Some organizations, which strictly follow the wording of the tax provisions, allow LTA claims only when the employee takes official leave for the journey. In such cases, LTA claims for trips undertaken on weekends or public holidays may be rejected.
Example:
Suppose an employee did not use LTC in the 2018–21 block. He can carry forward one journey into the 2022–25 block. If he avails LTC in April 2023, that journey will be treated as belonging to the 2018–21 block. This means he can still claim two more journeys in the 2022–25 block.
Illustration
Case:
Mr. D traveled with his wife and three children (one son aged 5 years and twin daughters aged 3 years) to Delhi on 25 December 2023. They traveled by flight (economy class). The employer reimbursed the ticket cost of ₹60,000 (₹45,000 for adults + ₹15,000 for children).
Solution:
Since the son was born before the twins, the two-child restriction does not apply in case of multiple births after the first child. Hence, Mr. D can claim exemption for all three children. As the travel was within India and in economy class, the entire reimbursement of ₹60,000 is fully exempt under the old regime.
Alternative Case:
If the twins were 5 years old and the son was 3 years old, the restriction would apply. In this case, exemption can be claimed only for two children.
- Taxable portion of LTC = ₹15,000 × (1/3) = ₹5,000
- Exempt portion of LTC = ₹60,000 – ₹5,000 = ₹55,000
Frequently Asked Questions on LTA/LTC
Q1. What is the latest block period for claiming LTA/LTC exemption?
The current block period of four calendar years runs from 1 January 2022 to 31 December 2025.
Q2. Can I claim LTA/LTC for my family’s travel expenses?
Yes. You can claim LTA/LTC for travel undertaken by yourself and your family, which includes your spouse, children, dependent parents, brothers, and sisters.
Q3. How many journeys are allowed as exempt in one block of four years?
You can claim exemption for two journeys within a block of four calendar years.
Q4. Can my family travel alone, and I still claim LTA/LTC?
No. The exemption is only available if the employee also travels. Claims cannot be made if only the family members travel.
Q5. What is the maximum amount I can claim as exemption under LTA/LTC?
The exemption depends on the LTA/LTC component in your salary package (CTC). You can claim up to the amount specified in your CTC, subject to valid travel proofs and the rules of exemption.
Q6. Is LTA/LTC exempt under the new tax regime?
No. Under the new tax regime, LTA/LTC is taxable. It is exempt only if you opt for the old tax regime and satisfy the required conditions.
Q7. I did not claim LTC in the last block (2018–2021). Can I use it in the current block (2022–2025)?
Yes. If you did not avail LTC in the previous block (2018–2021), you are allowed to carry forward one unclaimed journey to the current block (2022–2025). This carried forward exemption must be used in the first year of the new block.
