Once in a while it comes to a point where you have too much on board and all you think of is having a vacation. What if your vacation could help you save some money while providing you the much-needed break from work-life? It’s possible, thanks to LTA. 

LTA, or leave travel allowance, is an allowance included in the salary package of employees, specifically designed to cover their travel expenses incurred during vacations. LTA forms a part of CTC (Cost to company) offered to employees.

The Income Tax Act, 1961 offers several tax exemptions to salaried individuals. Leave Travel Allowance or LTA is a type of allowance given to employees by employers for travel. It covers within-country travel costs when an employee is on leave from work. Section 10(5) of the Income Tax Act, 1961 with Rule 2B ensures the exemption of tax and also details the conditions, subject to tax exemption

LTA being a part of your CTC not just helps in making up for your travel expenses but also helps in saving taxes. So, how can a salaried employee claim this benefit and what conditions should he meet?

Conditions for claiming LTA

• All travels within the country (within India) are covered and considered for exemption.
• The exemption covers travel expenses of the employee and his/her parents. Spouse, children, siblings or mainly dependent parents.
• The mode of travel must be by bus (govt recognised or private travel buses registered), economy airline (economy class fare) or train.
• You can claim exemption two times or journeys in a block of four years, (current block period is 2022-2025).

So, in order to comply with conditions for LTA benefits, one must plan their travel within the stipulated block years firstly, rest other rules can be adhered to.  

Also Read: What does Travel Now Pay Later mean?

What’s not covered as Leave Travel Allowance

Only the actual cost of the travel (including tickets, bus fares) are covered. Food, accommodation and other additional expenses are not covered under this. More than two children of an employee born after October 1, 1988 are not eligible for Leave Travel Allowance exemption.

How to calculate LTA?

The amount of LTA exemption depends on the LTA component in your compensation package or CTC. For instance, if your CTC includes Rs. 55000 as LTA, you can only claim an amount equal to this or less. For example, if your cost comes around Rs. 35000 then this amount would be exempted. The remaining part will be considered as taxable income.

LTA provides the scope of reducing their travel expenditure alongside availing tax benefits. All you need is proper planning to ensure maximum benefits. Also keep all the original invoices of fares (boarding passes, tickets) while submitting for claim as proof to the employer. 

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