Understanding Tax Deductions on Leave Travel Allowance (LTA)

Hello and welcome to Part 3 of the income tax education series brought to you by H&R Block, the global leader in filing income tax returns. Today we will talk about Leave Travel Allowance.Let’s say you spend money on travel every year when you go for your holidays. Can you get tax exemptions for this expense?

The answer is Yes. You do get an exemption from tax on the amount that you spend on journeys. Leave travel allowance is an allowance given to an employee to meet the expenses of journeys. LTA exemption can be claimed only for two journeys, in a block of 4 years and is limited to the amount actually spent on journeys. To claim this deduction you have to preserve the journey tickets as a proof. Even if you and your spouse undertake more than one journey, you two may claim this deduction with your respective employer for two journeys each in a 4 year block. This ways you can maximize your deduction and reduce tax liability. E.g. Kunaland his wife Swati travel to KulluManali on a vacation in the month of May 2015 spending Rs. 15,000 on flight journeys and then again to Kerala in October 2015, spending Rs. 20,000 on flight journeys. LTA received by Kunal for the year is Rs. 20,000 and by Swati is Rs. 10,000. The deduction will be limited to the amount of LTA received or amount spent on journeys whichever is less.Hence if Kunal claims LTA deduction for Kerala journey then he will get an exemption of Rs. 20,000 since he spends Rs. 20,000 on his journey. Swati, his wife on the other hand will get an exemption of Rs. 10,000 only for the journey made to KulluManali since her LTA received is Rs. 10,000 even if the amount spent is Rs. 15,000.

There is a condition in the IT Act that the amount allowed as exemption will be for the shortest route between the two destinations. Also now that Kunal and Swati have availed of an exemption in 2015 they can claim exemption only once each in the block of 2015 to 2019.

I hope you found this useful. If you have any further questions on this topic, please feel free to ask us using #AskBlock.
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