If you do not know, LTA or Leave Travel Allowance exemption is available for travel expenses (comprising air, road or rail fare) by the employee and his family for two journeys performed in a block of four calendar years, subject to fulfilling various conditions. The current block of four years expires in December this year.

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 you for 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.

Overseas Travels

Tax exemption on leave travel allowance or LTA can be claimed only on domestic travel and cannot be clubbed with an overseas journey. If an air ticket comprises Indian and overseas components, no exemption will be provided either on the entire cost or on partial Indian travel. This was clarified in a recent ruling by the Chandigarh bench of the Income Tax Appellate Tribunal (ITAT) while hearing an appeal of a PSU bank employee. The employee, Om Prakash Gupta, had argued that since the final destination was India, the entire airfare claimed by him should be tax exempt. His travel included visits to Singapore and Malaysia.

Gupta further appealed that if not the entire amount, at least the cost incurred on the Indian leg of the journey should be considered for tax exemption. But the ITAT bench denied his appeal.

“Section 10 (5) of the Income Tax Act and Rule 2B do not stipulate that journey to any place in India would be made via a place outside India. The intention of the legislature was certainly not to grant exemption for reimbursement of the value of the LTA where the journey was performed via a foreign country,” the bench observed, ruling out any exemption.

Under the tax laws, even for domestic travel, where the journey is performed in a circular form touching different places, the exemption is limited to the travel expenses that would be admissible from the place of origin to the farthest point reached in India, by the shortest route.

The Central Board of Direct Taxes in its October 5, 2012 circular relating to TDS from salary income for 2012-13, had made LTA claim processing norms stringent. It was made mandatory for employers to satisfy themselves that the LTA claimed was treated as tax exempt in accordance with the laws. Further, employers were required to collect and preserve supporting evidence of LTA claims made by employees.

You cannot claim Leave Travel Allowance (LTA) exemption on overseas travels

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