10(5) Tax Rebate

Holidays with family and relations are not only enjoyable but you also get tax breaks on your travel allowance. Your company sponsored Leave Travel Allowance has tax deduction under section 10(5).

Eligibility for 10(5) rebate

If you are a salaried employee and if your salary includes LTA you can claim tax rebate on the amount actually spent on travel costs subject to these clauses:

1. Travel should be within India. Overseas travel is not covered.

2. Travel costs on yourself, spouse, child, parent, brother and sister provided they are dependent on you. Deduction is limited to 2 children if they were born after 1 October 1998 unless in the second birth there were multiple births.

3. In a block of four calendar years you can claim deduction on LTA for 2 journeys. The block is fixed by the Income Tax department. The present block for LTA is 2010-13. If you fail to claim deduction on 1 or 2 journeys in a block you can still carry it forward claim it on a journey made within 1 calendar year following that 4-year block.

For instance if you did not claim tax benefit on LTA in 2013 and you go on a leave in 2014, you can claim tax benefit on this journey in 2014 and still be eligible to claim LTA deduction on 2 more journeys in the block 2014-17.

4. If your LTA is not used in a year it can be carried forward.

5. Eligible deduction amount:

Ticket fare on journey undertaken by the shortest route between two destinations via the following modes can be deducted:

a) Economy class of a national air carrier

b) AC first class by rail

More conditions apply-

If the destinations are connected by rail but you travel by another mode except by air, the fare on AC first class by rail can be deducted.

If the destinations are not connected by rail but are connected by other public transport, fare on first class or deluxe class travel of that public transport can be deducted. If the destinations are not connected by any public mode of transport then the eligible amount for deduction under 10(5) is AC first class fare by rail.

If the actual fare is less than the above, that amount is considered to be eligible.

Maximum deduction limit under 10(5)

The actual amount spent on travelling cost or LTA, whichever is lower, can be claimed for deduction under section 10(5). Travelling cost means cost of transportation and does not include expenses on accommodation, food etc.

Fintotal comment

If you or a family member travelled in this block all you have to do to get LTA tax refund is to mention this to your employer. He is supposed to put the amount in Form 16 while filing TDS on salary. Your taxable income would automatically reduce by the amount claimed.

It is not mandatory for your employer to see proofs of your travel fare before deducting Leave Travel Assistance from your TDS you should maintain them for your own record while filing Income Tax Returns.


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