LTA – Leave Travel Allowance, Income Tax Rules explained

Anil Gupta  4 Dec, 18      15  Finance

LTA is the short form for Leave Travel Allowance. It is part of your CTC and can be used to make your travel costs tax free legally in Indian Taxation system.

Although, it is good that salaried person is exempted from paying tax on the amount, he spends on travel expenses of his family, he can only do so twice in a block of 4 years.

There are other restrictions too with respect to claiming LTA and we discuss them here.

LTA terms and conditions for Tax exemption

TermsMeaning
Travel ExpensesOnly travel fare i.e. either by Air, train or bus qualifies for exemption.
No food, hotel, sightseeing etc. expenses are allowed for claim in LTA.
You can hire a taxi if there is no train, air or bus travel option available to your destination.
Travel outside IndiaThinking of a vacation in Bangkok? Forget LTA!
LTA tax exemption is only allowed for travel expenses to a destination within India.
FYI, Andaman and Nicobar islands are part of India.
FamilyYou can take you dependent parents, dependent siblings, spouse and two children.
All their travel expenses will be exempted.
Luxury TravelTax exemption can only be claimed for economy class air fare, first class AC rail fare or first/ deluxe class bus fare.
LTA tax exemption LimitFull amount as specified in your CTC letter or given by your employer is exempt if you can provide the bills for it.
Note that only Travel expenses can be claimed.
Carry forward your unspent LTAIf you have not claimed your LTA in first year, the amount is accumulated in your kitty.
Hence, you can claim for a higher amount if you travel in next year.
Year 1 amount + year 2 amount is available for LTA tax exemption claim in year 2.
Double Dip LTAIf both husband and wife are receiving LTA from their respective employer’s, then they both can claim LTA in the same year but for DIFFERENT journey’s.

One journey on which both husband and wife traveled cannot be claimed twice separately, even though they work in different companies.
There is no mechanism to verify this but, it is illegal to do so.
If caught by income tax officer, you can be penalized.

LTA - Leave travel allowance - rules and how to save tax in india
LTA – Leave travel allowance – rules and how to save tax in india

Some companies have the option of specifying your own LTA amount in the various kitty of allowances as per your preferences. It is generally called Bouquet Of Benefits (BoB). In this case, they fix the total amount of BoB and leave the various allowance’s figures for your to decide.

This is generally done to give you a free hand on what you think is the best for you to save tax.

For e.g. A common BoB could be something like this:

ComponentMonth/ AnnualMax. Tax Exemption
House Rent Allowance (HRA)7k/84kDepends on Basic Salary and city of residence.
Conveyance Allowance800/9.6kMax 800 per month
Medical Allowance1.25k/15kMax 1.25k per month
Food Coupons2k/24kMax 3000 per month
LTA1k/12kNo Maximum limit
Personal Allowance11k/131kFULLY Taxable
Total23k/276k 

In this example, there are various tax saving options via different kind of allowances including LTA. If you look at the structure carefully, there is an allowance called Personal allowance which is FULLY taxed.

Now, the point I am trying to make here is that all other allowance (except personal allow. – which is FULLY taxed), have a maximum limit for tax exemption. Hence, you can use LTA for your advantage and declare it as maximum value after consuming maximum amount of other expenses and then reducing personal allowance.

You may argue that you may NOT travel and hence would not be able to claim any tax benefit.

I would say that it won’t make any difference even if you declare it and not claim it. But if you do NOT declare it, you are anyway going to be taxed on personal allowance amount and cannot claim in case you do travel!

This is also the reason behind saying that consume all other tax saving allowances to their maximum before increasing LTA.
So, I would say that this should be the ideal BoB for this example:

ComponentMonthly/ AnnualMax. Tax Exemption
House Rent Allowance (HRA)7k/84kDepends on Basic Salary and city of residence. Max. value utilized
Conveyance Allowance800/9.6kMax 800 per month utilized
Medical Allowance1.25k/15kMax 1.25k per month utilized
Food Coupons3k/36kMax 3k per month utilized
LTA11k/131kNo Maximum limit. FULL BoB limit utilized
Personal Allowance0/0FULLY Taxable
Total23k/276k 

I hope this will clarify lot of queries about LTA in your mind.

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  1. Hi,
    The current LTA block is between 2018-2021 but I haven’t declared the LTA for FY 2018-19 to my employer. Now I am going to travel in Feb-19 so Can I claim this travel in FY 2019-20?
    Thanks.

  2. Vidisha Agrawal   25 Oct, 18 at 3:56 am

    Please answer me

  3. Vidisha Agrawal   25 Oct, 18 at 3:56 am

    Hi, if any one is getting Rs. 3,00,000 per annum then what should be the max basic salary and how can i categorized it into different segment so that there is no deduction like PF,ESIC or TAX too.


  4. Hi, whether LTA is added to total income for computing income tax or it is taxed separately ?
    I may have to pay tax because i have received my LTA amount from company though I have not traveled in this AY.
    So instead of traveling for claiming LTA exemption, can I save tax by investing under 80C ?

    • Anil Gupta   16 Feb, 18 at 8:17 am

      LTA tax exemption is separate than 80C. You cannot substitute one for other.
      If your company has paid you the amount and you have not travelled, then, yes, it would have been added to your income for tax calculation.

  5. PARAG GOEL   9 Feb, 18 at 3:57 am

    Hi, Can i claim LTA if it s not part of my salary component ?


  6. Hi Soan, I am New joinee. I declared LTA for 25,000. But I don’t go anywhere. So, When i get back my money(25,000) which is detected from my salary every month

    • Anil Gupta   20 Jan, 12 at 2:24 am

      Hi JPushKala, LTA amount pay out depends on your company policy. Some pay it out monthly (after dividing it equally between the remaining months in financial year and deducting tax) and some pay it at the end of financial year (i.e. in march payroll). If you have not submitted the bills, company will deduct the tax and pay you the amount.
      Check with your HR to know how they treat the LTA payments.


  7. If i have declared less amount for LTA than the maximum cap determined by the company, but if my travel costs are higher than the declared amount… then can i apply for a rebate during form 16 filing? assuming maximum claim would be within the company set limits..

    • Anil Gupta   7 Jan, 12 at 12:50 am

      Hi Kn,
      Form 16 is filled up by employer on the basis of your actual bills and declarations. You can’t modify it on your own. If your travel costs were more than you declared, you can certainly submit the proofs of actual amount to your employer and they will consider it if it falls within the company’s set limits.
      Let me know if you need more information.


  8. Hi, Do we need to claim LTA for a single trip in a year or we can claim for total amount (fair) in a year?
    Ex: In 2011-12 FY, if i have taken leaves twice and travelled and each travel cost me Rs. A and Rs.B. So can i claim for “A+B” or only once either “A” or “B” amount.
    Thanks,
    Irshad

    • Anil Gupta   18 Dec, 11 at 4:10 am

      As far as i know, it is only allowed for a single trip. You can’t club multiple trips is a block or a year and claim as one LTA.