Leave Travel Allowance (LTA)

Leave Travel Allowance (LTA) is a component of an employee’s salary package provided by the employer to cover the travel expenses of the employee and their family while on leave within India. It is designed to encourage employees to take vacations and is eligible for tax exemption under Section 10(5) of the Income Tax Act, 1961.

Purpose: LTA is meant to reimburse the travel cost (fare) incurred by the employee for journeys undertaken for personal leave or vacation within India.

Eligible Travel Expenses: Only the fare for travel by air, rail, or recognized public transport is eligible. Expenses on accommodation, food, or sightseeing are not exempt under LTA.

Eligible Family Members: LTA exemption applies to travel expenses of the employee and their immediate family, including: Spouse Dependent parents, brothers, and sisters

Frequency of Exemption: LTA exemption can be claimed twice in a block of four years (as notified by the Central Government). The current block (as per the latest cycle) is 2022–2025.

Condition: Travel must be undertaken within India; foreign travel is not eligible. Proper travel proofs or tickets must be submitted to claim the exemption. Assessment Year (AY) and Financial Year (FY) Connection The Financial Year (FY) is the period in which income (including LTA) is earned — generally from April 1 to March 31. The Assessment Year (AY) is the following year in which the income of the preceding FY is evaluated and taxed by the Income Tax Department.

Example: If an employee receives LTA and undertakes travel in FY 2022–23 (April 1, 2022 – March 31, 2023), that LTA amount and its exemption are assessed in AY 2023–24 (April 1, 2023 – March 31, 2024).