Calculate Deduction on Leave Travel Allowance under Section 10(5) of Income Tax Act

How to Calculate Deduction on Leave Travel Allowance(LTA) under Section 10(5) of Income Tax Act, 1961. LTA Deduction/exemption under income tax is available to individual employee for travelling in India with his family. LTA Exemption or Deduction amount will be limited to  travel costs i.e. cost of ticket, entire cost of the holiday is not covered under LTA Exemption, so one must keep the ticket safe and submit it to employer in order to claim LTA deduction under Income Tax.

  1. Leave Travel Allowance (LTA) is granted by the employers to the employees as part of the remuneration to provide for travel expenses incurred during the year.
  2. Leave travel allowance is the amount or value of any travel concession or assistance received by the Assessee or employee or amount due to him because of any of the reasons given below:
  3. From his employer for himself and his family in connection with his proceeding on leave to any place in India;
  4. From his employer or former employer for himself and his family in connection with his proceeding on leave to any place in India after retirement from service or after termination of his service.
  5. The value of LTA is exempt under section 10(5) of Income tax Act 1961
  6. Family of individual for the purpose of LTA exemption amount includes:
    1. The spouse and children of the individual;
    2. The parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on him
  7. For the purpose of exemption of LTA one must have travelled within the country, however international travelling is not valid for exemption
  8. Under LTA exemption only travel costs are covered i.e. cost of ticket, entire cost of the holiday is not covered; so one must keep the ticket safe and show it in order to claim LTA. 
  9. For children born after October 1, 1998, the exemption is restricted to only two children (unless, one birth has resulted in multiple children like twins and triplets).
  10. If members of family travel without Assessee no LTA can be claimed.
  11. As per the Rules, for the purpose of LTC block of 4 calendar years is available and Assessee can claim the LTA benefit only twice during the block of 4 years means The exemption can be availed only in respect of two journeys
  12. One must take the shortest route to their destination to be eligible for LTA. If journey is performed in a circular form touching different places, the LTA exemption will be limited for the journey from the place of origin to the farthest point reached, by the shortest route.
  13. As per rule 2B , exemption under section 10(5) is subject to the following conditions prescribed by the govt.:  

Read How to Plan Income Tax Deduction under section 80C, 80CCG, 80D, 80DD, 80E,80G, 80GG to 80U

 

Different Situations

Amount Of Exemption If Journey Is Performed On Or After 1-10-1997

 

  • For journeys performed by Air

  • Where journey is performed by rail
  • Air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination or amount spent, whichever is less
  • Air-conditioned first class rail fare by the shortest route

 

  • Where place of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air
  • Air-conditioned first class rail fare by the shortest route to the place of destination.

 

  • Where place of origin of journey and destination or part thereof are not connected by rail
  • (i) Where a recognised public transport system exists, the first class or deluxe class fare on such transport by the shortest route to the place of destination.

 

 

 

 

(ii) Where no recognised public transport system exists, the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey has been performed by rail.

 Download Income Tax Return (ITR) 1: Income Tax Return for AY 2013-14 for Salaried Person

Reference: Section 10(5) of the Income Tax Act

(5) in the case of an individual, the value of any travel  concession or assistance received by, or due to, him,—

(a)  from his employer for himself and his family, in connection with his proceeding on leave to any place in India ;

(b) from his employer or former employer for himself and his family, in connection with his proceeding to any place in India after retirement from service or after the termination of his service,

subject to such conditions as may be prescribed (including conditions as to number of journeys and the amount which shall be exempt per head) having regard to the travel concession or assistance granted to the employees of the Central Government :

Provided that the amount exempt under this clause shall in no case exceed the amount of expenses actually incurred for the purpose of such travel.

Explanation.—For the purposes of this clause, “family”, in relation to an individual, means—

  (i) the spouse and children of the individual ; and

 (ii) the parents, brothers and sisters of the individual or any of them, wholly or mainly dependent on the individual;

Rule 2B prescribes the conditions as well as quantum of exemption, which are as follows:

Conditions to be satisfied – Conditions to be satisfied are as under:

  • The exemption is admissible on the value of any travel concession or assistance received by or due to an assessee from his employer or former employer, as the case may be, for himself and his family, in connection with his proceeding (i) on leave to any place in India, or (ii) to any place in India after the retirement from service, or (iii) to any place in India after the termination of his service.
  • The exemption is admissible in respect of actual expenditure incurred for journeys performed, not only by the assessee but also by his family.
  • For this purpose, ‘family’ means (i) the spouse and children of the assessee, and (ii) the parents, brothers and sisters of the assessee provided that they are wholly or mainly dependent on the assessee. With effect from 1-10-1997, the Central Civil Service Leave Travel Concession Rules have been amended in this respect.
  • The exemption can be availed only in respect of two journeys performed in a block of four calendar years. For this purpose, the first four-year block commenced with the calendar year 1986. Thus, the four-year blocks will be 1986-89, 1990-93, 1994-97, 1998-2001, 2002-05, 2006-09 and so on.
  • If an assessee has not availed travel concession or assistance during any of the specified four-year block periods on one of the two permitted occasions, or on both occasions, exemption can be claimed provided he avails the concession or assistance in the calendar year immediately following that block. This is popularly known as the ‘carry-over’ concession. In such cases, the exemption so availed will not be counted for purposes of regulating the future exemptions allowable for the succeeding block of four years.

Quantum of exemption.—The basic rule is that the quantum of exemption will be limited to the actual expenses incurred on the journey. This pre-supposes that, without performing any journey and incurring expenses thereon, no exemption can be claimed.

In addition to the above general limitation, the quantum of exemption will also be subject to the following maximum limits, depending upon the mode of transport used or available:

 

JOURNEYS PERFORMED ON OR AFTER 1-10-1997

 

  • For journeys performed by Air
  • Air economy fare of the national carrier (Indian Airlines or Air India) by the shortest route to the place of destination.

 

  • Where place of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air
  • Air-conditioned first class rail fare by the shortest route to the place of destination.

 

  • Where place of origin of journey and destination or part thereof are not connected by rail
  • (i) Where a recognised public transport system exists, the first class or deluxe class fare on such transport by the shortest route to the place of destination.

 

 

 

 

(ii) Where no recognised public transport system exists, the air-conditioned first class rail fare, for the distance of the journey by the shortest route, as if the journey has been performed by rail.

Restricted concession for children.—Under sub-rule (4) of rule 2B, inserted with effect from 1-10-1997, exemption on travel concession will not be admissible to more than two surviving children of an individual born after 1-10-1998. This restriction will not however apply in respect of children born before 1-10-1998, and also in cases where an individual, after getting one child, begets multiple children (twins/triplets/quadruplets, etc.) on the second occasion. The implications of this restriction will be as follows :

  • In respect of journeys performed on or before 1-10-1998 exemption will be admissible in respect of all the surviving children of the individual.
  • In respect of journeys performed after 1-10-1998
    • the exemption will be admissible to all surviving children born before 1-10-1998;
    • in addition, the exemption will be admissible to only two surviving children born on or after 1-10-1998. In reckoning this limit of two children, children born out of multiple births after the first child will be treated as ‘one child’ only.

It may be noted that section 2(15B) of the Act defines a ‘child’ as includes ‘a step-child and an adopted child of the individual’. Hence the aforesaid restrictions will operate in respect of step-children and adopted children also provided they are born on or after 1-10-1998.Bottom of Form


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