All about LTC Exemption

Some companies pay a LTA or a Leave Travel Allowance to their employees. Employees are allowed to claim leave travel concession. This is availed on a trip done anywhere in India and cannot be claimed for travel outside India.

This Concession is allowed for the employee and his/her family– where family means spouse and children. Allowed for maximum 2 children (born on or after 1st October 1998). Children include step child and adopted child, and if there are twins born after the first child those are considered as one! Family will also include parents, brother, sister, who are wholly or mainly dependent on the employee. Also, the Tax Department requires that the whole family travels together.

This particular exemption is up to the actual expenses, therefore unless you actually do the trip and incur expenses on the trip, you cannot claim it.

Also note that only 2 journeys in a block of 4 years are allowed. So you may make more than 2 trips on 4 years however exemption can be claimed only for 2. Note that the current block has started on 1st January 2014 and ends on 31st December 2017. In this period you can claim 2 journeys against your LTA. In case you been able to undertake only 1 journey in your 4 year block – you are allowed a carry over concession. Which means in the first calendar year of the next block you can undertake one carry over journey (and additionally do 2 journeys of the current block).

The most relevant point is the exemption is allowed for the shortest route. So let’s say you decided to go from Delhi to Mumbai and on your way you also stopped at Ahmedabad and Pune, the exemption that will be allowed is the fare of the shortest route, from Delhi to Mumbai. Let’s see how this can be claimed.

When travel is by air Air Economy Class Fare of the national carrier by the shortest route or actual expenses, whichever is less
When journey is by rail AC First Class rail fare by the shortest route or the actual expenses, whichever is less
Where start destination and final destination are connected by rail and journey is done by any other means of transport AC First Class rail fare by the shortest route or the actual expenses, whichever is less
When start destination and final destination are not connected by rail
  • If a recognized public transport system exists
First class or deluxe fare by the shortest route or the actual expenses, whichever is less
  • If a recognized public transport system does not exist
AC First class rail fare by the shortest route(assuming journey was performed by rail) or actual expenses, whichever is less

 

If you get an LTA allowance your can reduce your LTA exemption as calculated above from this amount and the balance if any shall be taxed under the head salaries.

In case you have questions about how to claim your LTA – do write to us and we will be happy to support you, you can reach us support@cleartax.in

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