Employees who choose the old tax regime should be aware of the different exclusions and deductions available to them to decrease their tax liability. The Leave Travel Allowance (LTA) is one such perk. Employees can claim it if it is part of their compensation or cost-to-company (CTC).
According to sources, there are several limits and requirements to claiming LTA. Understanding these is critical for maximizing its benefits. Understand how to claim LTA, the documentation necessary, and the eligibility conditions for travel.
What is LTA?
Leave Travel Allowance (LTA) is a portion of an employee’s income set aside to cover travel expenditures during holidays. It includes the fees for family members joining the employee on vacation. However, it does not cover expenditures for lodging or meals.
LTA Eligibility and Rules
To claim LTA, the employer must include it as part of the pay package. Travel costs must be established by documentation evidence and reported to the employer by the stated dates. Remember that even if you are entitled to LTA, you must travel and give your employer original evidence of your journey to file a claim. You cannot claim this exemption if you did not travel during your leave.
Key Requirements To Note When Claiming LTA Are:
When claiming LTA, keep in mind the following requirements. Here’s a checklist that summarizes the regulations and conditions for claiming LTA.
- Taxpayers can claim LTA for themselves or their immediate family members while on leave. The immediate family consists of spouses and children (up to two if born after October 1, 1998). Additionally, parents, brothers, or sisters who are completely reliant on the individual might be considered family for LTA reasons.
- The LTA exemption only applies to domestic travel inside the country; international travels are not covered.
- Individuals are allowed to seek LTA exemptions for a maximum of two travels every four years. The current block term runs from January 1, 2022, to December 31, 2025.
- If an employee has not used LTA in the previous four years, they can do so in the first year of the following block.
- LTA covers the quickest path from the point of origin to the destination, with precise rules governing travel routes and ticket classes.
- Other expenditures, such as hotel stays, meals, and lodging, cannot be claimed via LTA. Furthermore, airport transfers, such as those from the airport to the hotel and vice versa, are not eligible for LTA claims.
- The LTA prohibits the exemption of travel expenditures inside the city.
Claiming LTA: How Much and How?
An LTA claim cannot exceed the actual cost of travel plus the employer’s LTA. When planning your vacation, keep in mind that LTA may only be used to claim certain travel expenditures.
a) For Air Travel: Economy airfare on the national carrier’s shortest route or the actual amount paid, whichever is less.
b) For Rail-Connected Travels Not By Air: Air-conditioned first-class rail price for the quickest trip, or the real cost, whichever is lower.
c) For Trips Not Linked By Rail:
- If a recognized public transportation system exists: First- or deluxe-class fare using the quickest route.
- If no recognized public transportation system exists: Air-conditioned first-class rail price for the shortest route, as if the trip were made by rail.
Necessary Documents Required
The following documents can be presented to the employer to claim LTA exemption:
- Original travel bills, such as bus or train tickets.
- If you are travelling somewhere where rail or air service is not accessible, bring original automobile rental invoices.
- Provide airline tickets and boarding permits.
- Bank/credit card/debit card/wallet statements indicating payments made.
These records, together with a signed Form 12BB, serve as proof of expenditure. To minimize problems while completing your income tax return, you should send all LTA-related documentation to your employer within the relevant fiscal year.
