Employee are getting Leave Travel Allowance (LTA) as a part of their Salary (CTC) but important factor is that LTA is received only on annual basis and not add to your monthly take home salary. You have option to take LTA as taxable or non taxable Hence if you want it to be non-taxable, there are provisions U/S 10(5) of Income tax Act which entitled employee for exemption on Leave Travel Allowance (LTA) hence It is necessary to understand how to calculate exemption on Leave Travel Allowance (LTA).
Exemption on Leave Travel Allowance is allowed in case of travelling expenses by employee (including their family) on leave to any place in India during service or after retirement or termination of employment hence employee can availed exemption for travelling while on leave during tenure of service. Exemption would be limited to actual expenditure incurred for journey.
Income Tax exemption on Leave Travel Allowance (LTA) is allowed with reference to mode of Journey as mentioned below:
- Journey by Air: Maximum Economy fair of the National carrier by shortest route to the place of destination.
- Journey by Rail: Maximum First Class A.C. rail fare by shortest route to the place of destination.
- Journey by recognised public transport :Where a recognised public transport is available, maximum 1st Class or deluxe class fair by shortest route to the place of destination where there is the absence of connectivity by rail
- Journey by any other mode: An amount equal to first class rail fare by shortest route to the place of destination, in absence of public transport system as if journey had been performed by rail way.
- Exemption is permissible only with respect to fare and not for any other expenses.
- Family for LTA purpose include the spouse and children of employee. Parents, sisters and brothers of who are mainly or wholly dependent upon employee
- LTA will not be allowed for two children of employee after 1.10.1998. Exception would be only in case children born before 1.10.1998 and also in case of multiple births after one child.
Block for calculating Exemption on Leave Travel Allowance (LTA):
Employee can claim exemption only in respect of two journeys in the block of four years. Four calendar years consist one block. Current block is 2010-2013. List of blocks are as under:
If assessee has not availed LTA exemption either for both or one journey in a particular block, he is entitled to take exemption in respect to first journey in the calendar year immediately succeeding the end of block of four years. For better clarification he can carry forward one journey with respect to first journey in subsequent calendar year unless otherwise period is extended by appropriate authority. Such Journey will not be reckoned for calculating exemption for two journeys in a block of four calendar years.
Example of Leave Travel Allowance/Concession:
Suppose ‘y’ employee has not availed exemption for two journeys in block of four years i.e. 2010-2013. He will lose exemption for one journey and He can carry forward first journey up to 2014 only. And this journey will not be reckoned for calculating Two journeys in 2014-2018 blocks.