Can anything be better than a free vacation? For India’s hard-working employees, the Leave Travel Allowance benefit offered by some employers is a huge perk. But there are rules connected to LTA, including a restriction on the number of days you can take in a designated period of time. An employee can take LTA in two simultaneous years, but to do so, he may not claim it in either of the other two years in that same four-year block.
The Leave Travel Allowance can be claimed in simultaneous years, although it may not be claimed for more than two years within a four-year block.
What Is LTA?
LTA allows employers to reimburse qualifying workers for travel within the state of India. The trips can be made by air or railway, but it has to begin and end in India. LTA covers the employee and qualifying family members, including spouses and up to two children or other dependents. If you have an adult parent who is primarily dependent on you, for instance, that parent’s fare would also be covered under LTA.
Exploring Fare Stipulations
Employers can only reimburse up to economy airfare or the cost of a first-class rail ticket. The allowance can also be offered in advance of the trip, but it can only cover the cost of travel based on the most direct route from the origination to the destination, not including any stops or reroutes. There are also instances where an employee may take a circular route with multiple stops. In those instances, travel fare reimbursement will be based on the cost to travel to the farthest distance on that route.
Important Tax Considerations
One of the best things about LTA is that the amount paid is not considered taxable income. Employers are not required by tax authorities to collect proof of the employee’s fare purchase to pay an LTA, but they can require it as part of company policy. Workers are advised to retain receipts from their fare purchases in case an employer requests it. Only travel fare is reimbursable without taxation. If your employer offers an allowance for the cost of accommodations, for instance, that amount will be taxed as income. If your employer offers LTA in advance and you don’t use it, you will be responsible for paying income taxes on the amount you received.
Assessing Simultaneous Years
LTA is calculated in blocks of four years, with each block designated ahead of time. The years 2014-2017 were one block, and 2018-2021 is the current block. You can only use LTA to cover the transportation cost of your trip two years in any four-year block. That means if you used LTA in 2018, you can use it again in 2019 but you won’t be eligible again until the next block begins in 2022.
Evaluating Unused Blocks
One important designation when it comes to blocks is that if you don’t use both allowances of LTA in that time period, you may be able to carry one over to the next block. However, this only applies in the last year of a block. So if you only use LTA once between 2018 and 2021 and you don’t use it in 2021, you can carry it over to 2022. You will only be able to use that carried-over LTA in the year 2022. If you do, you’ll still have two years that you can claim LTA in the new block.