LTA Section in Income Tax: Save Tax on Travel the Right Way!
Are you a salaried employee seeking to optimise your salary components? If so, the LTA section in Income Tax could be a golden opportunity for you. LTA, or Leave Travel Allowance, is one of the most popular tax-saving tools provided to employees under the Indian tax regime.
Let’s dive deep into what this exemption is, how it works, who can claim it, and what rules & limits apply.
What is the LTA Section in Income Tax?
LTA refers to the Leave Travel Allowance that an employer provides to employees to cover domestic travel expenses during a leave period. The LTA section under income tax is governed by Section 10(5) of the Income Tax Act, which provides tax exemption for Leave Travel Concession (LTC).
This means that under certain conditions, the travel cost reimbursed by your employer will not be counted as part of your taxable income, leading to real tax savings.
Who Can Claim LTA?
Only salaried individuals can claim LTA. It’s typically part of the salary structure in most organisations. LTA is claimable only when:
- The employee has travelled.
- The travel is within India.
- Travel is done via public transport (rail/air/road).
Here’s the twist: You cannot claim LTA without travelling. Many people assume it's an automatic tax exemption, but documentary evidence of travel—such as tickets & boarding passes—is mandatory."
LTA Exemption Limit: What’s Covered & What’s Not
Under the LTA exemption limit, only the travel fare is exempted. This includes economy class airfare, first-class train fare, or the equivalent bus fare. It does not cover hotel bills, food expenses, or local transportation within the city.
Additionally, travel expenses of immediate family members—such as spouses, children, & dependent parents—are also eligible under this exemption.
LTA Block Year System Explained
The LTA block year is another important aspect. The government has created blocks of four calendar years (not financial years). For example, the latest block is 2022–2025.
In each block, you are allowed to claim LTA twice. If you miss claiming it in one block, you can carry forward one trip to the next block—but it must be used in the first year of the new block.
So, planning your travel & claim timing is key to maximising this exemption.
Can You Claim LTA in Old & New Tax Regimes?
Under the old tax regime, LTA is a well-known benefit. But under the new tax regime, introduced in FY 2020–21, most exemptions & deductions—including LTA—have been discontinued.
So, if you're looking to claim LTA under the old tax regime, ensure you’re not opting for the new regime in your ITR."
How to Claim LTA
Wondering how to claim LTA without travelling? Unfortunately, you can’t.
But if you have travelled, here’s how to claim it:
- Submit travel proof & claim form to your employer.
- Ensure it’s done within the prescribed time (usually by the end of the financial year).
- If your employer doesn’t reimburse it, you can still claim it in your ITR.
Remember, LTA calculation on basic salary isn’t standard across all companies—it varies depending on your employer's salary breakup. Some employers offer a fixed LTA exemption limit, while others calculate it as a percentage of basic pay.
LTA Rules for Private Company Employees
For those working in private companies, the rules are the same as laid out under Section 10(5). However, the approval process, claim deadlines, & reimbursement formats may vary based on internal HR policies.
Just ensure that:
- Travel was done while on official leave.
- The travel was for a domestic destination.
- All documents are properly submitted.
If these conditions are met, you are good to go, even if you work for a startup or an MNC.
Final Thoughts
The income tax LTA section is a great way to reduce taxable income legally, if you know how to use it correctly. All you need to do is plan your travel, keep your documents in order, & apply on time. It's not just about saving tax, it’s about travelling smart!
✈️ Want help in structuring your salary or maximising your LTA claims legally & efficiently?
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