To claim income tax exemption on leave travel allowance or leave travel concession (LTC), you need to be familiar with the eligibility criteria. This component (LTA) can be most likely be part of your overall CTC but cannot be treated as tax-free income every year as part of section 10(5) of The Income Tax Act, 1961. So, while it cannot be claimed each year, you may not be able to claim exemption on the full amount also.
How To Claim Income Tax Exemption On LTA?
Conditions and amount of exemption that can be claimed on LTA
As per the provisions, LTA exemption is available only to the salaried taxpayers on actual domestic travel expenditure incurred by an employee during his or her leave. Also, it is worth noting that the maximum LTA exemption claimed by you cannot exceed the LTA component of your salary income.
LTA exemption is allowed on the actual expenditure in relation to travel, so if no travel is undertaken then you cannot make a claim. Further no exemption can be claimed beyond the costs of travel.
Amount of exemption available from different means of transport
For travel by air: Amount of income tax exemption on LTA cannot be higher than economy class airfare of Air India on the route.
For travel by railways: In this case, salaried class can make a maximum claim of up to railway ticket fare as in AC first class.
For travel by other modes of transport: An exemption of up to AC first class rail fare is allowed.
To calculate LTA, the travel expenses of spouse, kids, dependent parents as well as siblings are accounted for. However, with regards to LTA exemption, there is a limitation that considers only two children who are born after October 1, 1998.
When can you claim tax exemption for LTA?
Employees can claim LTA exemption in respect of only 2 journeys in a block of 4 years. For the current period, the block applicable began in January 2018 and terminates in December 2021.
Also, for the previous block i.e. 2014-17 if you have missed out on making the claim then you are allowed to carry forward one journey to the new block that began in 2018. But here is a catch that you need to make the claim in the first year of the block. This way you can make a maximum of 3 tax exemptions for LTA in a block of 4 years.