LTA Exemption — Leave Travel Allowance and How to Claim Tax Exemption

Leave Travel Allowance (LTA) is a salary component that employers pay to cover employee travel expenses during annual leave. Under Section 10(5) of the Income Tax Act, LTA received from the employer is exempt from income tax — subject to specific conditions about the type of travel, frequency and evidence. Here is the complete guide.

LTA Exemption — Basic Conditions

• LTA exemption is available only for domestic travel — travel within India; international travel is not covered
• Travel must be for the employee and their family (spouse, children, dependent parents and siblings)
• Only 2 journeys in a block of 4 calendar years are exempt
• Current 4-year block: January 2022 to December 2025 (new block: January 2026 to December 2029)

What Travel Costs Are Covered?

LTA exemption covers only the actual cost of travel (fare) — NOT hotel, food, sightseeing or other expenses:

• Where air travel is used: Economy class air fare of the national carrier (Air India) on the shortest route to destination — the actual ticket amount if lower
• Where rail travel is used: First class AC rail fare on the shortest route to destination
• Where no air/rail connects: First class or deluxe class bus fare
• Actual fare paid if lower than the class limit

Children Restriction

LTA exemption covers up to 2 children born after October 1, 1998. Children born before this date are covered without restriction. Twins or triplets born in a second pregnancy are treated as one unit.

Carry-Over Rule

If only one journey has been availed in a 4-year block, the unclaimed exemption for one journey can be "carried over" to the first year of the next block. This means in the first year of the new block, 3 journeys can be claimed (2 from the new block + 1 carry-over from the old block). However, the carry-over is allowed only for one journey.

Documentation Requirements

• Boarding passes, tickets, and receipts must be preserved as evidence
• Submit to employer for processing in Form 16 / TDS deduction adjustment
• If not processed by employer, declare in ITR as exempt income separately

LTA and New Tax Regime

LTA exemption under Section 10(5) is NOT available under the New Tax Regime. Employees opting for the new regime cannot claim LTA exemption.

Conclusion

LTA exemption is a valuable salary tax benefit — but limited to domestic travel, 2 journeys per 4-year block, and actual travel fare. SPOTON maximises all salary exemptions including LTA in client ITRs and advises employees on tax regime selection. Contact us for expert income tax filing services.