How to claim LTA exemption while filing returns

LTA is an allowance received by an employee for personal outstation travel. LTA exemption is available for two journeys in a block of four calendar years. The current block is 2022 to 2025. The LTA received by an employee is exempt to the extent of the lower of the following: actual cost of travel and LTA.

The actual cost of travel is limited to air, rail or bus fare incurred for domestic travel. Expenses on local conveyance, sightseeing, stay, food, etc., are not eligible for this exemption. Note that if the employees’ salary structure does not have an LTA component, they can’t claim exemption for any travel expense.

LTA exemption is available for employees and their families, including spouse, children and dependent parents and their siblings. For example, Kahan travels with his family from Mumbai to Indore by train and spends two days at Indore. Then, he travels from Indore to Udaipur by train and spends two days there and then returns to Mumbai from Udaipur . He claims LTA as shown in the table. In case of multi-destination journey, the exemption is available for the travel cost from the place of origin to the farthest place in the journey via the shortest route i.e. the claim allowable in this case would be for the direct train fare from Mumbai to Udaipur and return. Assuming the fare for Mumbai to Udaipur and return (each leg of the journey) is the same, the allowable claim would be ₹2,000 x 2 = ₹4,000 per person which would aggregate to ₹16,000 for four persons.

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In case, an employee has not availed exemption with respect to one or two journeys in any year within the block of four years, they are allowed to carry over such exemption to the next block, and avail the benefit in the first calendar year of the succeeding block.

For example, Manish travelled only once during the block 2018-2021 and could claim LTA only once. During the block 2022-2025, he can carry over and claim LTA for the previous block of 2018-21 in 2022. However, he cannot carry over this beyond 2022. Now, suppose Manish travelled in August 2022, then he can claim this LTA as carry-over of the 2018-2021 block rather than in the 2022-2025 block. For any further travels, he will have the opportunity to claim exemption in the 2022-2025 block two more times.

So, if you haven’t claimed LTA twice in the 2018–2021 block due to the pandemic and have travelled or are planning to travel in 2022, you can claim the carry-over of the 2018-2021 block.

Suppose Kanika could not claim LTA exemption in the block 2018-21 and she travelled twice in 2022. Then, can she claim one LTA for the 2018-21 carry-over and another in the 2022-2025 block? The answer is, no. LTA exemption is available only for one trip in one calendar year. Since she travelled twice in 2022, she should claim the highest expense amount as the LTA carry-over of 2018-21. For the block 2022-25, she can claim exemption for any travels in future.

Nitesh Buddhadev is a chartered accountant and founder of Nimit Consultancy.