TAXABILITY OF LEAVE TRAVEL ALLOWANCE (LTA) SECTION 10(5)
According to Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B (Commonly known as LTA Rules), provides for the exemption and outlines the conditions subject to which LTA is exempt. Through this write-up, I want to shed light on the taxability and some other important aspects which you as a salaried employee must keep in mind.
Exemption of Fare Only As per LTA Rules, LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption
Travel within India
As per LTA Rules, travel has to be undertaken within India and foreign tour ( outside India) are not covered under leave travel allowance.
Exemption on Actual Travel Expense
For example, where an employer provides LTA of Rs. 25,000, but an employee spends only Rs. 20,000 on the travel cost, then the exemption is limited to only Rs. 20,000. Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay etc.
Meaning of Family for Leave Travel Allowance
As per LTA Rules, the meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you. An individual would not be able to claim the exemption in relation to his parents, brother or sisters unless they are wholly or mainly dependent on the individual.
Restriction on Number of Children for Claiming LTA :- As per LTA Rules, exemption is not available for more than two children of an individual born after October 01, 1998. This restriction does not apply in respect of children born before this date, and also in cases where an individual, after having one child, begets multiple children (twins or triplets or quadruplets, etc.) on the second occasion. The term “Child” includes a step-child and an adopted child of the individual.