Leave Travel Allowance (LTA) - [ Section 10(5) read with Rule 2B ] - Income Tax - Ready Reckoner - Income Tax

Leave Travel Allowance (LTA) [ Section 10(5) read with Rule 2B ] LTA is the remuneration paid by an employer for Employee s travel in the country, when he is on leave with the family or alone. LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. The total cost of the holidays is not covered, only the travelling cost is covered. Travel has to be undertaken within India and overseas destinations are not covered for exemption. For example , where an employer provides LTA of 25,000, but an employee spends only 20,000 on the travel cost, then the exemption is limited to only 20,000. Family for the purposes of exemption includes a) spouse and children of the employee, b) parents and brothers and sisters who are wholly or mainly dependent on employee. Restriction Exemption is not available for more than two children of an individual born after October 01, 1998. In cases of multiples births on second occasion after having one child is also not affected by this restriction. The tax rules provide for an exemption only in respect of two journeys performed in a block of four calendar years. The block applicable for the current period is the calendar year 2022-25. Exemption is allowed only when the person claiming deduction is also travelling. If only family is travelling then deduction is not allowed. Carry forward of unclaimed LTA : If the employee has not claimed LTA in the last running block or just claimed it for once, he can still claim one additional LTA in the next block of calendar years under the carry over concession rules under which the employee can claim LTA tax-breaks on 3 journeys made in the current block of years. However, in order to utilize the carry over concession facility, the one LTA exemption with respect to the journey must be claimed in the first calendar year of the next block. Multi-Destination Journey : If an employee is travelling to different places in a single vacation, the exemption can only be availed for the travel cost eligible from the place of origin to the farthest place in the vacation by the shortest possible route. Amount Exempted : Journey performed by Air - Economy Air fare of National carrier by the shortest route or the amount spent whichever is less will be exempt Journey performed by Rail - A.C. first class rail fare by shortest route or amount spent whichever is less will be exempt. Place of origin and destination place of journey connected by rail but journey performed by other mode of transport - A.C. first class rail fare by shortest route or amount spent whichever is less. Place of origin destination not connected by rail (partly/fully) but connected by other recognised Public transport system - First class or deluxe class fare by shortest route or amount spent whichever is less. Place of origin destination not connected by rail (partly/fully) and not connected by other recognised Public transport system also - AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent, whichever is less. NOTES: 1. In case the LTC is encashed without performing the journey, the entire amount received by the employee would be taxable.