LTC/LTA: Treatment of Leave Travel Concession or Assistance

Among the types of perquisites you have learned, Leave Travel Concession or Assistance(LTC/LTA) carries great importance. It is the perquisite given to employee on his leave travels. It also includes employee’s family members.

LTC/LTA
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What is the tax provision of LTC/LTA

The employee is entitled to exemption under section 10(5) in respect of the value of travel concession or assistance received by or due to him from his employer or former employer for himself and his family.

This is connected with employee’s following proceeding:

  1. On leave to any place in India.
  2. To any place in India after retirement from service or after the termination of his service.

The exemption shall be allowed subject to the following:

  • Where journey is performed by air: Maximum exemption shall be an amount not exceeding the air economy fare of the National Carrier by the shortest route to the place of destination.
  • Where places of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air: Maximum exemption shall be an amount not exceeding the air-conditioned first class rail fare by the shortest route to the place of destination; and
  • Where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed between such places: The amount eligible for exemption will be:
    • where a recognized public transport system exists, an amount not exceeding the 1st class or deluxe class fare, on such transport by the shortest route to the place of destination.
    • where no recognized public transport system exists, an amount equivalent to the air-conditioned first class rail fare, for the distance of journey by the shortest route, performed by rail.

 Exemption will however, in no case exceed, actual expenditure incurred  on the performance of journey.

Point you should note

How many times can exemption for LTC/LTA be claimed?

The assessee can claim exemption in respect of any two journeys in the block of 4 years. The blocks you must consider in a way like: First block was calendar year 1986-89 and thereafter calculating, the current block will be 2018-2021.

If the assessee has not availed of the exemption of LTC in a particular block, whether for both the journeys or for one journey, he can claim the exemption of first journey in the calendar year immediately succeeding the end of the block of four calendar year.

In other words, maximum one journey can be carried forward and that too only for the first journey in the following calendar year unless the period is otherwise extended.

Such journey undertaken during the extended period will not be taken into account for determining the tax exemption of two journeys for succeeding block.

Tax provision on Exemption available for number of children

The exemption relating to LTC/LTA shall not be available to more than two children of an individual born after 1.10.1998.

The above rule will not apply in respect of children born after 1.10.1998 and also in case of multiple birth after one child.

Point you should note

Important points you must know

  • In case the LTC/LTA is encashed without performing the journey, the entire amount received by the employee would be taxable.
  • The exemption is allowed only in respect of fare. Expenses incurred on porterage, conveyance from home to railway station/airport/bus stand and back, boarding and lodging, etc. will not qualify for exemptions.
  • Exemption is available in respect of shortest route. Even if the journey is performed in any manner, the maximum exemption will be considered on the basis of shortest route.