Leave Travel Allowance(LTA/LTC), How to use for Holidays and Travelling Free


(Last Updated On: December 14, 2017)

Yesssss!

Your boss has finally given you a break, and you know just the perfect place to spend your holiday. You look up the ticket prices… but, even the cheapest flight is very expensive.
It’s time to stop looking at the fares because you can actually save tax while on a holiday. Want to know how? By claiming you Leave Travel Allowance (LTA).


What is Leave Travel Allowance (LTA)/Leave Travel Concession (LTC)?

When it comes to saving tax, Leave Travel Allowance/Leave Travel Concession is one of the best friends that an employee can have. Leave Travel Allowance is an income tax exemption offered by an employer to his employee. As per this, the employer reimburses the travel expenses for the vacation taken by an employee. However, any other expense such as food, shopping, lodging etc. is not included in the exemption.

Can I take my Family along?

Yes! Isn’t that great? The exemption is applicable whether you are travelling alone or with your family. So the travel expenses for your family is also reimbursable by your employer and is tax-FREE! But here’s the thing, the Income Tax Department has described the word family. I wish it was just a dictionary definition. But for the purpose of Income Tax Act and LTA, a family consists of:

  • Spouse;
  • Children;
  • Dependent Parents;
  • Dependent brothers and sisters.


That’s great, So how can I claim LTA/LTC?

It couldn’t be easier. You just need to fill in the details in Form 12BB and submit the proof of your travel like the boarding pass, rail tickets, travel agent’s invoice, etc. However, there’s a red flag here. Many employers do not provide for LTA/LTC in the salary structure of the employee. So don’t forget to check with your employer before you consider claiming LTA/LTC.

Here are the Preconditions to Claim LTA:

Of course, like everything else, there are some preconditions to claim Leave Travel Allowance/Leave Travel Concession exemption as well:

  • Exemption is only on actual travel cost;
  • Available for only two children of an individual, born after October 1st, 1998 including a step or adopted child;
  • Travelling Twice in a block of Four years is allowed. The current block is 2014-17;
  • Mode of travel should be air, rail or any other public mode of transport;
  • Allowed for domestic travels and not for international travels.

So can I buy the most Expensive Ticket?

Oh no, you can not rob the government. The fare is exempt as per the following conditions:

  1. If you are travelling by air, price of economy class ticket for the shortest route or the amount actually spent on air fare, whichever is lower in amount; or
  2. If you travel by rail, the First class ticket for the shortest route or the amount actually spent on train fare, whichever is lower; or
  3. If you, however, want to travel by any other mode – the exemption is limited to first-class, deluxe, or AC first-class fare, by the shortest route.
  4. However, if you have travelled via. an unrecognised public transport system then, you can claim an amount equal to the AC first-class rail fare, by the shortest route, as if the journey had been performed by rail.

Some Fun Facts about LTA

  • You can carry forward your LTA/LTC:
    Yes, you read it right! The government lets you carry forward your unclaimed LTA to the first year of the next block. This means, if you have claimed only 1 LTA in the previous block of 4 years, you can carry forward and utilise the 2nd LTA  and claim it in the first year of the next block. However, if you are unable to claim it in the first year, you will lose the opportunity.
    Suppose, the 4-year block for your LTA is 2014-2017. During this period, if you have not claimed your LTA or if you have claimed it only once, then you will be allowed to carry forward 1 LTA to 2018 (first year of next block i.e. 2018-21). However, If you do not claim it in 2018, it will lapse.
  • What if you have 4 Children?
    The applicability of restriction of two children, in such cases, is different. If after having one child, you have more than 1 child (twins, triplets, quadruplets, etc.) on the second occasion, then they are considered as one child for the purpose of LTA. Thus, such expense on their travel ticket is allowed.
  • Block Year is different from Financial Year
    Yes, These block years are different from Financial Years and are created by the Income Tax Department. The current block is 1st January 2014 – 31st December 2017.

Can you feel the Holiday Mood yet?

The beaches of Goa are calling you! Or will it be a chill trip to Andaman and Nicobar with your family, this time around?

Forget all about the world and travel like that Wanderlust in you!

Here’s why your Employer has not issued Form 16 Yet!

Still not sure? Get the help of our experts, click here

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.