The Income-tax act provides various exemptions and allowance benefits to salaried individuals. Leave travel concession (LTC)/Leave travel allowance (LTA) is one of the allowances that become the component of the salary of the employee.
LTC is provided by the employer to employees to meet the travel expenses when the employee is on leave from work. It is eligible for income tax exemption as per the Income Tax Act, 1961. Section 10(5) of the Income-tax act specifies the various provisions and rules for claiming LTA exemption.
Conditions to claim LTC
1. The employee must have gone to the actual journey via any medium i.e., road, air, or rail. However, the employee must submit a valid proof of cost to claim the leave travel allowance.
2. Only domestic travel (i.e., within India) is allowed to claim exemption.
3. An exemption can be claimed for the employee alone or with the family.
- Here, ‘family’ includes the employee’s spouse, children, and wholly or mainly dependent parents, brothers, and sisters of the employee.
- If husband and wife both are working and entitled to LTA, then only one of them can claim for the same travel.
- After 1.10.1998, LTC can be claimed up to two children. However, the child of the employee born before 1.10.1998 is eligible for LTC.
Tenure to claim Leave Travel Concessions
A taxpayer cannot claim the LTC in every financial year. He/She can claim leave travel concession for any two journeys in a block of 4 years. The current running block for claiming LTA is calendar years 2018-2021.
Carry forward of the unclaimed LTA of a block year
If the employee has not availed the exemption for LTC or has claimed it for once in a particular block, he can claim the exemption of the first journey in the calendar year immediately after the end of the block of four calendar years. Therefore, only one journey can be carried forward to the next year’s block.
For example, you have traveled only once in the last block of the year i.e., between 2014-2017. Then, the second travel concession of the block of 2014-17 can be claimed between 2018-2021. Hence, you are eligible to make LTA claims upto 3 journeys in the current block i.e., between 2018-2021.
Further, in case leave travel concession is encashed without performing the journey, the entire amount received by the employee would be taxable.
Amount of exemption for Leave Travel Concession
The maximum exemption allowed to the employee for LTC is the “actual travel fare expenditure” incurred during the domestic journey. It should be noted that no claim shall be allowed for the expense incurred on conveyance from residence to the place of origin, boarding, and lodging or other expenses during the journey.
LTC exemption claim w.r.t. various mode of transport
|Mode of transport||Amount of Leave travel Concession allowed|
|Travel by Air||The amount allowed for exemption is not exceeding the air economy fare of the National Carrier by the shortest route to the place of destination or actual fare, whichever is less.|
|Travel by Train||If the place of origin and destination of the journey are connected by rail, and the mode of journey is other than by air, then the first-class AC rail fare by the shortest route or the actual fare, whichever is less shall be allowed for exemption.|
|Travel by any other mode||If a recognized public transport exists, then the 1st class or deluxe class fare on such transport by the shortest route or actual fare, whichever is less.If no recognized public transport system exists, then the first-class AC rail fare by the shortest route, as if the journey had been performed by rail or the actual fare, whichever is less.|
How to claim LTC?
The employee is required to submit the proof of travel cost incurred during the journey. However, it is not obligatory to provide the evidence to the employer, but while claiming the same in the Income-tax return, an assessing officer may ask for the proof.
Therefore, you should keep the travel expenses proof before claiming the ITC.