Working long hours in the office to meet deadlines and handle client queries can be mentally and physically draining. This continuous routine over the years will start taking a toll on your health. You may find yourself battling with hypertension and diabetes.
To help employees manage work-life balance and give themselves and spend quality time with their families, many employers encourage short trips to offbeat destinations, and as a token of support, offer them a leave travel allowance, also called LTA.
What is a leave travel allowance?
Leave travel allowance policy is a travel benefit offered to employees by their employers to cover travel expenses when they take a holiday or vacation. LTA benefits extend to transportation expenses and include bus, train, and flight tickets for trips within the country. The allowance is accessible to employees and their direct family members.
Importance of leave travel allowance (LTA)
Here is how leave travel concession helps you:
- LTA reduces the travel burden by covering the rising costs of domestic travel.
- LTA motivates you to take a planned break from your work routine and helps improve your health, reduce burnout, and improve your work efficiency.
- LTA allows for shared experiences with your family, like visiting new places and exploring cultural destinations. This strengthens your bond with your dear ones.
When are you eligible for LTA?
To qualify for LTA reimbursement, you must meet the following criteria:
- You can claim LTA only for travel made within Indian borders.
- LTA is usually available to full-time employees, and not to those on a contractual basis.
- Most organisations offer LTA only if you travel during working days. If you are travelling during holidays, no such benefits are offered.
- LTA benefits are available in both cases, whether you are travelling alone or accompanied by family members. The term ‘family’ here includes your spouse, children, siblings, or dependent parents.
- No claim shall be processed if you fail to furnish proof of travel, such as air, rail, or road tickets.
- LTA benefits do not extend to meal expenses and accommodation.
What is a leave travel allowance exemption?
LTA is a tax benefit offered to salaried employees under Section 10(5) of the Income Tax Act of 1961. Since it is part of your CTC (cost-to-company) but also tax-exempt, it lowers your overall taxable income.
However, this tax benefit is not available if you have opted for the new tax regime, which offers lower tax rates but limited exemptions and deduction benefits. To qualify for the exemption, you must satisfy the following criteria:
- You cannot claim LTA if you have more than two children. However, an exception to this condition applies if, after your first child, you have twins in the second delivery.
- You can claim LTA only for travel made during the block year. As per the Income Tax Act, a block year comprises four calendar years.
- You cannot make an LTA claim for every trip made in a block year. The benefits extend to a maximum of two journeys.
Factors to consider before claiming LTA
Keep the following conditions in mind before you claim LTA:
- Carryover: If you have not claimed LTA for one or two trips in India, you can carry forward one such unclaimed LTA to the next block. However, you should claim the unavailed exemption in the first calendar year of the new block period.
- Shortest Route: The exemption is offered based on the shortest travel route. For example, if you want to travel to location ‘x’ from location ‘y’ and the train you took travels 350 km to reach the destination, while another train via an alternative route travels 300 km to reach the same distance, the fare for the latter will be taken into consideration.
- Multi-destination: If your itinerary includes 3-4 destinations, the fare for the LTA claim will be calculated on the basis of the distance between the starting point of your trip and the farthest destination, not the distance between the different destinations.
- Airfare: If you are travelling by air, the maximum you can claim is the actual ticket expenses or the cost of an economy class ticket of Indian Airlines, whichever is lower.
- No public transport: If you are travelling by a mode of transport not recognised for public use, LTV can be claimed for the lower of actual expenses or the price of the first-class rail fare, with the shortest route distance considered from your starting point to your destination.
- Rail service: If you are travelling by railway, the exemption is the lower of the actual fare or the first-class air-conditioned coach ticket for the shortest distance to your destination.
Why does travel insurance matter when claiming LTA?
LTA and travel insurance both help in a stress-free trip. While LTA covers transportation expenses, it does not account for last-minute trip cancellations or any emergencies you may encounter during your domestic travel.
Having travel insurance by your side, you are covered for expenses incurred due to trip cancellations arising from unavoidable situations, medical emergencies at your destination requiring hospitalisation, loss of baggage, and trip extensions caused by events such as unrest or natural disasters.
Conclusion
LTA benefits go beyond financial means; it helps you take a break from your hectic worklife and enjoy quality time with your dear ones in a scenic location. Although LTA covers your transportation expenses from your source station to your destination, the financial assistance will not help if you are faced with emergencies like a medical crisis, lost baggage, or rescheduled travel plans. To bridge this gap, it is important that you purchase a comprehensive single trip travel insurance plan offering domestic coverage.
FAQs
1. What expenses does the LTA cover?
LTA covers travel expenses for employees and their immediate family members. It includes train, bus, and flight tickets but excludes accommodation and food expenses.
2. How many times can I claim LTA?
You can claim LTA twice in a block period. The current four-year block period is 2022-25.
3. Can LTA be encashed?
No, you cannot convert LTA into cash or salary. It is solely meant for travelling.
Disclaimer: The information provided in this blog is for educational and informational purposes only. It may contain outdated data and information regarding the topic featured in the article. It is advised to verify the currency and relevance of the data and information before taking any major steps. ICICI Lombard is not liable for any inaccuracies or consequences resulting from the use of this outdated information.