Leave Travel Allowance (LTA) Exemption Calculation

Leave Travel Allowance (LTA) Exemption Calculation

Leave Travel Allowance (LTA) Exemption Calculation

What is Leave Travel Allowance?

Leave Travel Allowance is a concept of providing an extra benefit by the employer to his employee by compensating or paying a certain amount to meet the travel expenses incurred by him for himself as well as his family during the time of service. It is taxable under the head “Income from Salaries” subject to exemption under section 10(5) of The Income Tax Act. The section stated in the Act is as follows:

Section: 10(5)

“In the case of an individual, the value of any travel concession or assistance received by, or due to, him,-

(a)   From his employer for himself and his family, in connection with his proceeding or leave to any place in India;

(b)    From his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after termination of his service,

Subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to travel concession or assistance granted to the employees of the Central Government:

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.”

[Family in relation to individual means:

i)           The spouse and children of the individual; and

ii)       The parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual.]

To understand properly: Examples of LTA

The conditions prescribed by an Act to avail exemption of LTA:

-          The exemption is available only if the employee has actually taken the leave from the company and travelled and such travel expenditure is incurred for travelling in India.

-          LTA is exempt to the extent Travel cost actually incurred i.e. no other expenses such as stay, food, etc. are covered.

-        The exemption is available for two journeys in a block of four calendar years which started from 1986-1989 and the current block is 2010-2013.

-    The Act provides with one more benefit with respect to the above condition that if an assessee has not travelled in the previous block than he can avail exemption of the same in the first calendar year of the next block along with the two exemptions for the same block.

-       The maximum amount for which exemption can be availed can be calculated from the limits provided by Act depending upon the mode of Transportation used or available by/to the assessee. Such limits are as follows:

Applicable for Journeys performed after 30/09/1997
Mode of Transport	Available Exemption
By Air	Economy Class fare of the National Airways (Indian Airlines or Air India), by the shortest possible route to the place of destination.
Where place of origin of journey and destination are provided with the rail and the journey is performed by any mode of transport other than by air	AC First Class rail fare by the shortest route to the place of destination.
Where the place of origin and destiny or part thereof are not connected by rail	i)    Where a recognized public transport system exists, the first class or deluxe class fare on such transport by the shortest route. ii)  In the absence of above, AC First Class Rail Fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.

-          In respect of availing exemption for travelling with children the points to be kept in mind are as follows:

o   If the journey is performed on or before 1.10.1998 exemption is available for all the children who travel along with the assessee.

o   But if the journey is performed after 1.10.1998

§  Exemption can be availed for all the children born before 1.10.1998

§  For the children born after 1.10.1998, exemption is available only for two surviving children. It also includes Step Child and Adopted Child.

To understand properly: Examples of LTA