Under section 10(5) of the Income Tax Act, Leave Travel Allowance (LTA) is a component of an employee’s salary that is given by the employer to cover travel expenses incurred during the employee’s vacation. Under the Income Tax Act, 1961, LTA is exempt from tax up to a certain limit. However, there are certain conditions that need to be met to claim the exemption.
The exemption for LTA is available for two journeys taken by an employee and his/her family in a block of four years. The current block for the purpose of LTA is from 2018-2021. The employee must travel within India and the travel expenses must be incurred on modes of transport such as air, rail, or public transport.
The exemption is limited to the actual travel expenses incurred by the employee, which includes the cost of tickets, boarding, and lodging. The exemption is available only for the shortest distance between the starting point and the destination, and the employee cannot claim exemption for any other expenses incurred during the trip, such as shopping or sightseeing.
It is important to note that LTA is not a mandatory component of an employee’s salary, and it is up to the employer to decide whether or not to provide it. If an employee does not avail of the LTA, it cannot be carried forward to the next block of four years.
To claim the exemption for LTA, the employee must provide the necessary travel receipts and proof of travel to the employer. The exemption can only be claimed for travel that has already taken place and cannot be claimed in advance.
In summary, LTA is an important component of an employee’s salary as it is exempt from tax up to a certain limit, provided that certain conditions are met. The exemption is limited to actual travel expenses incurred by the employee for two journeys taken in a block of four years. The employee must provide necessary proof of travel to the employer to claim the exemption.