Section 10(5) allows you to claim Income Tax Exemption on Leave Travel Allowance that is part of your salary payslip. If you receive LTA (Leave Travel Allowance) or LTC (Leave Travel Concession) component in your salary, you are eligible to claim this LTA / LTC if you travel within India. The cost incurred to travel within India can be used from this LTA component on which you don’t have to pay income tax if you claim such LTA. The limit of LTA to be claimed depends on the amount of LTA / LTC received by you in your salary. You can claim LTA for maximum 2 travels in a block of 4 years. The latest block for LTA is between 1st January 2022 to 31st December 2025.
Let us understand more about Section 10(5) related to Leave Travel Allowance (LTA) in detail.
- What is Section 10(5) of income tax act?
- LTA claiming conditions and eligibility
- Section 10(5) deduction limit for LTA
- Can LTA be claimed for all journeys under Section 10(5)?
- Can we carryover unclaimed LTA exemption?
- Frequently Asked Questions
What is Section 10(5) of income tax act?
- Section 10(5) of income tax act allows income tax exemption for travel cost incurred by you within India
- The LTA (Leave Travel Allowance) or LTC (Leave Travel Concession) that is part of your salary payslip can be claimed with old tax regime
- Which means, if you travel within India, and you receive LTA component in your salary, you can provide the proof of travel and avoid paying income tax on LTA component. By default, this LTA component is taxable if not claimed.
- Note that new tax regime does not allow LTA exemption to be claimed.
- The amount of LTA that can be claimed depends on the LTA component you receive from your employer. For example, if you receive Rs. 30,000 as LTA and your travel cost was Rs. 40,000, you can only claim maximum up to Rs. 30,000, since that is the limit as per your CTC
- And in case your travel cost is Rs. 20,000, than you can only claim this Rs. 20,000 as LTA exemption. Remaining Rs. 10,000 will be taxed as per your income tax slabs.
- You can also carryover the unclaimed LTA after the end of block, but it needs to be claimed in the first calendar year of next block.
- Section 10(5) allows LTA exemption only for travel cost (by air, train or bus). It does not allow exemption for cost incurred for sightseeing, hotel stay, food and other activities.
ALSO READ: Section 80C Deductions of income tax act
LTA claiming conditions and eligibility
There are certain conditions based on which you will be eligible to claim LTA:
- Only Individuals receiving LTA component can claim this exemption under Section 10(5)
- Individuals can travel alone, or with their spouse, children, dependent siblings or parents
- Actual journey is a must to claim LTA exemption. You cannot claim LTA without having any journey record
- Only domestic travel (travelling within India), is allowed to be exempted as LTA / LTC. International journeys will not be considered
- LTA exemption will not be available for more than 2 children of employee that are born after 1st October 1998.
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Section 10(5) deduction limit for LTA
Deduction limit to claim LTA exemption under Section 10(5) depends on the LTA component of your salary payslip.
So for example, if you receive LTA of Rs. 30,000 in your salary, and your travel cost within India is Rs. 40,000, than you can only claim maximum of Rs. 30,000 to be exempted from income tax, since that is the received LTA amount as per your salary payslip.
And if your travel cost is Rs. 20,000, than you can claim only Rs. 20,000 on which you don’t have to pay income tax. Remaining Rs. 10,000 will be taxable as per income tax slab rates you belong to.
Can LTA be claimed for all journeys under Section 10(5)?
No, LTA exemption can be claimed for maximum of 1 journey in a calendar year and for 2 journeys in a block of 4 years.
Latest block years is 2022 to 2025, during which you can claim LTA exemption for 2 journeys.
Can we carryover unclaimed LTA exemption?
Yes, you can carryover unclaimed LTA exemption in the previous block of 4 years, to next block of 4 years, provided you claim this LTA in the first calendar year of the next block of 4 years.
After first calendar year of next block, unclaimed LTA / LTC will not be allowed to be claimed.
So Section 10(5) of income tax act helps you to claim LTA / LTC exemption if LTA / LTC is part of your salary structure (CTC) and you travel within country. The cost incurred while travelling within country will be exempted from income tax as part of LTA exemption.
Please note that LTA exemption only include the cost of travel (by air, train, bus), and not for sightseeing, hotel stay and other activities.
Some more Reading:
- Section 10(13A) of income tax act to claim HRA (House Rent Allowance)
- Income Tax Deductions on Donations under Section 80G
- Section 24 of income tax act to claim Home Loan Interest Amount
Frequently Asked Questions
What is the procedure to claim LTA with Section 10(5)?
You need to have the proof of travel to claim LTA exemption. This proof can be submitted to your employer so that they can include LTA exemption in your Form 16 that is required while filing ITR (Income Tax Return)
Can we claim LTA for multi destination journey?
Yes you can claim LTA for multi destination journey, but the cost will be calculated using the shortest distance between the source and the final destination of the journey for LTA exemption purpose. So you cannot claim the entire amount you spent to cover multiple destinations over long route.
LTA exemption for vacation on holidays allowed?
For many organizations who follow strict rules provided by income tax act, the employers only consider for LTA exemption when you travel during your leaves. If you travel on public holidays or weekends, than some employers might not consider your travel cost for LTA exemption.
What is the latest block year to claim LTA with Section 10(5)?
The latest block of 4 years to claim LTA with Section 10(5) is 1st January 2022 to 31st December 2025.
What is exemption limit under section 10 5?
LTA exemption limit depends on the LTA component received as per your Salary structure (CTC). The cost incurred during travel, or the LTA component amount in your salary, whichever is lower will be considered as LTA exemption amount limit.
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