Rules for LTA Exemption
Section 10(5) of the Income Tax Act, entitles full exemption in respect of the value of the Leave Travel Allowance received from the employer, subject to following conditions:
1. LTA and the Block of Four Years:
LTA is not related to the date of joining, the government has fixed blocks of years for computation of LTA exemption. Further these blocks are calendar years i.e. from January 1 to December 31 and not financial years i.e. April 1 to March 31. During each block, a person is entitled to two LTA claims. The blocks are as follows:
2006 to 2009 January 2006 to December 2009.
2010 to 2013 January 2010 to December 2013.
You can claim the LTA benefit just once in a year, even though, you can claim two journeys in a block of four years. In other words you cannot claim both the journeys in one year. So, while a person can get an income tax exemption for two journeys in a block of four calendar years, he can make a trip only once a year. If you make two trips in a year, you lose one.
In case you don’t avail of the LTA exemption in a particular block, whether for both the journeys or for one journey, then you could carry forward one journey to the first calendar year in the next succeeding block of four years. Thus, in the next block of four years, you could claim the carried forward travel, plus, two journeys of that particular block. Let's say you do not take your LTA in 2010-13, or that you used only one LTA. In that case, you will be able to claim the pending LTA in 2014. This means that, in the 2014-17 block, in all, you will be entitled to three journeys.
2. The exemption is only for expenses on travelling, either by road, rail or air, within the country. The traveling expenses should be only for the primary mode of travel from home city to destination city. All expenses incurred on hotel rooms, sightseeing, food, taxi fare, auto fare, porter charges etc are excluded.
3. The amount eligible for exemption should be for travel with family, with you as the co-traveler.
4. You can get LTA only if you have applied for leave from your company and have actually traveled.
5. International travel is not eligible for LTA, traveling within the country is covered.
6. Only the travel costs is covered thus entire cost of the holiday is not covered. You need to submit the ticket to claim your LTA and therefore retain proof of your air, rail or public transport tickets.
7. If you could not get public transport and resorted to private transport like renting a car, get a bill issued by the rental company. If your employer does not accept the bill, you can always file an income tax return, claim an exemption and get a refund.
8. LTA covers travel for yourself and your family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working) and children.
9. If your family travels without you, no LTA can be claimed. You have to make the trip, either by yourself or, if claiming for your family, you should travel with them.
10. If you switch jobs, you can get the LTA not only from your present organization but also from your former employer, if the concession is lying unutilized.
11. You must take the shortest route to your destination to be eligible for LTA.
12. If your LTA is not utilised, it gets added to your salary and you will be taxed on it.