Skip to content


No need to submit LTA proofs to employer

Posted in Finance, Income Tax, News.

From now on, Employee will not have to submit proofs as evidence, to their employers for getting LTA (leave travel allowance) reimbursement.

Supreme court of India gave ruling that employers, while reimbursing LTA claims of their employees, are under no statutory obligation to collect  evidence and provide them to tax authorities.

As per Income tax rules of India, if transport bills for LTA are not provided, the amount will be taxed. E.g. If an employee has LTA allowance as Rs 50,000 in his CTC(cost to company), and he provides proofs of Rs 40,000 (boarding pass, air tickets, taxi vouchers) then income tax will be deducted for rest of the Rs 10,000. Does not matter whats the amount of LTA in an employee’s package, income tax laws only permits domestic air tickets only for LTA claim.

This court order came after a hearing of case between Larsen & Toubro and income tax department of India. Income tax department had argued that employer has to collect proofs from employee for LTA. Rejecting this, the supreme court in its order said: “The beneficiary of exemption under Section 10(5) (of the Income Tax Act) is an individual employee. There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 to collect and examine the supporting evidence to the declaration to be submitted by an employee(s).”

Here is the link to court appeal


565 Responses

Stay in touch with the conversation, subscribe to the RSS feed for comments on this post.

  1. Vernica Barretto says

    Sir,

    Please answer this query for me , i received if from my employee

    “I would like to know that total LTA amount accumulated in 2 consecutive years can be claimed tax free by furnishing bill.
    For example:

    Eligible LTA amount per year 20000.
    LTA of 2010 & 2011 (40000) can be claimed tax free by furnishing bill at the end of 2011.
    Similarly,
    LTA of 2012 & 2013 (40000) can be claimed tax free by furnishing bill at the end of 2013.

    • Pankaj Batra says

      @Vernica
      This would again depend on company policy of LTA payment.
      If company only pays LTA amount on claim and keep accumulating an employee’s amount until he claims for it, then two year’s LTA can be claimed at once to make it non-taxable.
      But if LTA amount for 2010 has already been paid after deducting taxes, then it cannot become non-taxable in 2011 after claim.

  2. Vernica Barretto says

    Sir,

    Please review the policy drafted for my org and comment if any addition subtraction required

    LEAVE TRAVEL ALLOWANCE POLICY
    1 Objective:

    To provide an opportunity to associates and family to visit a place of their choice for a vacation within India and compensate expenses incurred towards travel, which forms a part of their salary component and avail tax benefit.

    2 Scope
    Applicable to all full time associates.

    3. Eligibility
    All associates who have LTA as a component of their CTC are eligibile for LTA.

    4. Coverage
    For all associates whose CTC is taxable shall have a LTA as a component..

    5. General Guidelines
    5.1 Maximum LTA limit shall be one month’s basic salary.
    5.2 Associates can claim LTA for two journeys in a block of four years; one can claim the LTA benefit just once in a year. Both journeys cannot be claimed in the same year. The current block January 2010 – December 2012.
    5.3 Associate shall have to avail max 3 days planned leave, excluding weekly offs and public holidays.
    5.4 Travel is within India only.
    5.5 The entire cost of the holiday is not covered. Only the travel costs by air, train or public transport are covered.
    5.6 If you travel by car and it is owned by a central government organization like ITDC, the state government or the local body, then LTA is permitted. If you could not get public transport and resorted to private transport like renting a car, get a bill issued by the rental company.
    5.7 LTA covers travel for associate and family. Family, in this case, includes yourself, parents, siblings dependent on you, spouse (even if your spouse is working) and children. For children born after October 1, 1998, the exemption is restricted to only two surviving children.
    5.8 Associate shall need to declare at the beginning of financial year if they wish to claim LTA, however if associates declares to claim LTA in the beginning of the year and does not submit the necessary proofs and bills, tax would be deducted as applicable in the month of March.
    6 Procedure
    6.1 Associate who has LTA as a component of their CTC shall declare if they wish to claim LTA in that particular year at the beginning of the year.
    6.2 Employee should avail a minimum of 3 days leave to claim LTA. Leave should be planned and have approval from the Manager, minimum 15 days from the date of actual vacation.
    6.3 Employee shall submit the travel bills along with the copy of approved leave application and LTA Claim Form as per annexure I to finance department in the last quarter of the financial year i.e. January – March.

    • Pankaj Batra says

      @Vernica
      This looks good.
      Except one thing, why there is a need to declare claim in start of the year itself. Most of the people don’t plan too much in advance.
      As its a part of CTC, if employee has not claimed LTA till March (financial year end), just pay him/her after tax deduction. Else make it non-taxable and pay the amount.

      • Prateek says

        Dear Sir,
        Please answer my query urgently through mail. I have mentioned my mmail I’d for reference. I have joined a newly opened organisation. The HR/ Tax/ Leave/ PF/ Bonus policies have not yet been framed properly. When I checked with my management why there is no PF or LTA or Income tax included in the salary, he told me that there is a minimum requirement for implementing any such policies. I want to check what will be minimnum employee requirement for all these policies. Also please let me if these policies can be implemented if there are minimum 30 employees are there.

        Kindly help me at urgent basis.

        Thank you

        Regards

        Prateek

        • Pankaj Batra says

          @Prateek
          PF is mandatory once a company cross 20 employees.
          Regarding other components like LTA, HRA, earned leaves, Bonus etc, there is no standard rule and boundation on company. A company may form its own package structure.

          • PRATEEKR says

            It means that all the employees in the company are eligible for all these benefits. And also guide me wether deducting 10% every month from the salary is feasible on part of the company or not.

            Regards

            Prateek

            • PRATEEKR says

              Also I have made a new leave policy. Please let me know if I can send the same for verification. As the policy which was prevailing was incomplete as per me and these policies are made by consultants. Please guide me through it.

            • Pankaj Batra says

              @PrateekR
              This forum is for helping out common salaries class persons and We don’t provide any suggestions/consulting in framing employer’s policies.

      • shivani says

        sir

        please help me regarding the following, we have LTA as part of reimbursement , but as per the LTA ruling it is payable twice in a block of 4 years . please tell if an employee has availed of LTA last year how should we pay the amount of LTA this year , can we add it in the special allowance which is not a part of the reimbursement or pls suggest any other way we can do it.

        • Pankaj Batra says

          @Shivani
          This amount can be paid as special allowance or travel allowance with tax deduction.

          • shivani says

            CAN IT BE PAID on a monthly basis then

  3. Sunny says

    how is the number of leaves required defined. some organisation asks for 3 days or 5 days of leave. does this include weekends or just working days? how it should be best defined?

    • Pankaj Batra says

      @Sunny
      This totally depend on employer policy. There is no standard govt made rule for this.
      But generally most of the employer have 3 days earned leave policy excluding weekends.

      • Rakesh says

        Hi Pankaj,

        Would like to clarify the below example for LTA claim:

        Journet Planned: Delhi to Ooty( 4 person) ( no direct connection of train from Delhi to Ooty by train)

        Train Travel:
        Delhi –Banglore( 2300 Km approx) ticket cost: 16000Rs (4x4000Rs. P.P.)
        Banglore-Delhi ( 2300 Km approx) ticket cost: 16000Rs (4x4000Rs. P.P.)

        Car travel:
        Banglore- Ooty(250 Km Approx) Car cost: 8000Rs

        So total travel cost is 40000Rs while the total Km covered in 5100Km (2x 2300+250). So I would get the tax benefit for 40000Rs or something less.

        Br
        Rakesh

        • Pankaj Batra says

          @Rakesh
          Your train fare from Delhi-Bangalore would be eligible fully for tax benefit.
          But from Bangalore to Ooty, car travel won’t be considered. If a public transport exists between these places, only fare on that would be considered maximum for exemption.
          Say Bangalore-Ooty bus fare on state transport bus is Rs 250 per person, then you would only get maximum tax benefit of 250x4x2 = Rs 2000.

      • Nishant Dalal says

        Hi Pankaj,
        I want to know whether it is legal for a company to make its own rule for providing LTA tax benefits or not. When companies introduce clauses like minimum three/any days leave should have been availed, are they justified in the eye of law for that. If we have to take leaves (which have to be Paid Leaves – since we can’t take CLs for such long duration), we are actually getting no benefit as we would be losing on the money that we would have received if we had encashed my PLs. Please advise.

        • Pankaj Batra says

          @Nishant
          Its completely legal for company to frame own rules for LTA.
          LTA is a company provided benefit and not a standard tax saving deduction like 80C, 80D etc.
          Paid leaves (PL, or earned leaves ELs) are planned leaves and when you go out for holidays, its a planned trip.
          CLs are casual leaves for unplanned occasions like sickness etc.

  4. Sunita Kanwar says

    HI

    Is it complusory for employer to collect the documents from employees for their tax saving declaration made during the year or it is sufficient to collect the same on plane paper.

    Thanks
    Sunita Kanwar

    • Pankaj Batra says

      @Sunita
      Employer must collect 80C, 80D etc investment proofs from employee. If they are not provided employer must not consider tax deduction for that amount.

  5. Umesh says

    Hi, We want to travel to Mumbai-Srinagar-Mumbai, as there are no direct trains, can I claim LTA exemption for the economy air-fare from Mumbai-Srinagar-Mumbai or will it be a combination of Train fare from Mumbai-Jammu-Mumbai and car-fare from Jammu-Srinagar-Jammu?

    • Pankaj Batra says

      @Umesh
      You can claim economy class airfare on such route. There is no issue in it.

  6. Raj says

    Hi Pankaj
    Our company shows LTA as part of CTC. But they say that employees are eligible for it only if they complete 1 year of employment. Is this right? What about people who leave the organisation before 1 year? Shouldn’t they get LTA pro-rata?

    Also, they say that LTA will be paid out only if you travel. If not travelled, then LTA won’t be paid out. Are they right?

    • Pankaj Batra says

      @Raj
      LTA is an employer provided benefit and you would have to stick to employer rules.
      Employer is not wrong in framing such rule. Many of the employers have similar policy. Only few companies pay LTA on pro-rata basis.

      But, as LTA is a part of CTC, they should pay amount after year completion after deducting taxes even if person has not traveled. If they don’t do so, they should carry forward same amount to next year and pay once employee claim or leave company, whichever is earlier.

  7. lakshmi narasimhan says

    IS IT NOT THE LTA IS TAXABLE TWICE IN THE BLOCK OF 4 YEARS ? PLEASE CLARIFY

    • Pankaj Batra says

      @Lakshmi
      LTA is non-taxable maximum upto two times in a block of four years. After two non-taxable claims, it would become taxable to each claim in same block.

  8. hima says

    Hi pankaj Nice Info.
    How many days we need to take leave to claim LTA
    Means If I travel on friday night to tuesday morning and taken leave for the monday
    As statuday sunday are holidays
    Can I avail LTA exemption?

    • Pankaj Batra says

      @Hima
      It depends on employer’s policy. Ask your employer for their policy of LTA.
      Generally its minimum two days earned leaves.

  9. Aakanksha says

    Hi Pankaj,

    1. I joined new organasiation in Oct 2011.As per organisation rule I can claim LTA only after completion of 11 months.I travelled by air from mumbai to delhi on 21st march 2011 with return journey on 30th March 2011.As my journey fall in 2011-12 financial year ,can I claim LTA exemption in 2012-13 FY for this journey.

    2. As mentioned earlier I can claim LTA only after completion of 11 months.My form 16 doesn’t show LTA as salary component though it is a part of my salary but form 16 of previous employer(duration march-Sept 2012) has LTA as part of my salary.Is it possible to claim LTA exemption while filling in tax return?

  10. sushant says

    Hi Pankaj,

    I worked as contractor for one of my client through third party resource porvider during (April-June) 2011 and later became permanent employee of that client from July 2011.During April-June period third party resource provider paid my fees with 10% TDS deduction.Later July 2011 onward my employer started deducting tax at 30% as per taxable income slab.

    Form 16 from my contract employer did have mention of my designation as contractor but when I filed for income tax return using income tax india online site I could not find any option where I could mention my employee status.After few days I received mail from income tax department indicating more tax payable.Later doing some calcuation I came to know that instead of calculating tax at 10%(April-June) and 30%(July-March),income tax department had calculated income tax at the rate of 30% for whole financial year due to which I was suppose to pay more income tax.

    I did not courier original document at that time but now I want to file return for (2010-11) and (2011-12).

    Please let me know how can I submit my return without having to pay extrat tax which is actually not required.

    • Pankaj Batra says

      @Sushant
      Income tax department is right is demanding more taxes.
      When you were on contract, its mandatory for resource provider to deduct 10% TDS only. If you fall in higher tax range, its your duty to pay remaining taxes.

      You should have computed total taxes for year (by adding contract income+salary income as taxable) and paid whatever was remaining taxes due to pay.

      Please note that TDS by employer and contractor does not means that there is no pending tax payable.

      You should pay remaining taxes now and file income tax return.

  11. Rahul says

    Hi Pankaj,
    I have a query regarding LTA reimbursement. I traveled from Delhi to Pune and Pune to Delhi. I have to and fro ticket print out and Boarding Pass of while returning from Pune to Delhi. Somehow I lost the boarding pass of traveling from Delhi to Pune.
    Is there any way if I can claim LTA ?

    • Pankaj Batra says

      @Rahul
      You should be able to claim LTA.
      Just provide your employer reimbursement forms with one pass copy and convince them about other pass being lost.

      • Rahul says

        my employer insisted for proof as they said that they can’t go by supreme court ruling for this fiscal yr however they are waiting for govt’s approval.

        I wrote to airline and they issued a travel certificate with all details. That’s how I managed to claim LTA.

  12. Prashant says

    Hello Pankaj,
    Can we get Tax exemption on LTA by providing proofs of it while filing income tax return? In my case, my company already deducted Tax on LTA because I didn’t acknowledge them before going on LTA vacation.
    Thanks in advance.

    • Pankaj Batra says

      @Prashant
      LTA deduction is not available while ITR filing. ITR form does not have any option to specify same.
      It should be claimed with employer only.

  13. Vijay says

    Hi Pankaj,
    Me and my friend travelled in his own car. Can we submit fuel bills to claim LTA?

  14. Ajay says

    Hi Pankaj,

    I have joined this company on January 2011 and claimed LTA for 2011 and 2012 last month so my one block of LTA is over. I need to check another block as per IT law in current phase.

    I also claimed total amount as per my CTC by providing taxi fare. Kindly let me know is this good enough.

    I also request if you have good LTA policy available with you as working as HR with one of the private organisation & revamping our policies right now. I need to have as much information as possible.

    Waiting for your response.

    Thanks
    Ajay

    • Pankaj Batra says

      @Ajay
      Providing taxi fare bills is fine, but total non-taxable amount would only be fare on public transport on such route (economy airfare, first class train or other public transport).
      LTA policy is similar in most of the organizations as income tax act has rules already defined.

      • Ajay says

        Dear Pankaj,
        Appreciate your prompt response.
        If we go by public transport then the total amount of LTA can not be achieved even not for me but all the employees of the organisation as well so need to take your views.
        What are the defined set of holidays as per income tax law?
        Thanks
        Ajay

        • Pankaj Batra says

          @Ajay
          LTA exemption is allowed for travel with family/dependents inside India on public transport. As per income tax act rules, Following amount would be non-taxable:
          1. Where journey is performed by rail; railway-fare in first AC class by shortest route to destination.
          2. Where places of origin and destination are connected by rail but the journey is performed by any other mode then first AC class fare by shortest route to the place of destination.
          3. Where place of origin of journey and destination, or part thereof, are not connected by rail and journey is performed by any other transport; then (i) If a recognised public transport system exists between such places the first class or deluxe class fare of such transport by shortest route, or, (ii) If in other case, first AC class fare for the distance of the journey by the shortest route, as if the journey has been performed by rail.

          As such there is no restrictions on number of holidays one should take, but employer may put 2-3 days leaves mandatory for claim.

  15. Vijay says

    Hi Pankaj,

    In may of above replies and other web searches, i have seen that minimum no. of days earned leave is required and I have seen different figure in different sites.
    Can you just tell me if CBDT have defined any directives on no. of days of earned leave. Actually last year I have taken 2 days leave but as per my company leave policy I need min. 3 days of leave to claim LTA tax exemption.

    Thanks in Advance.

    • Pankaj Batra says

      @Vijay
      As such there is no such condition in income tax rules, its the employer that may put such restrictions for claims.

      • vijay says

        Thnx Pankaj,

        LTA is part of my CTC and at year end we get it after tax deduction. Till last year we are getting it as part of salary instead of as a re- reimbursement. So If I am claiming LTA in my revised Return, I’ll not be defaulting based on company policy of min. 3 day earned leave.
        One more doubt is I am single and I have traveled alone (from Mumbai to Native place as there is no direct flight available from my work city), still can I claim for LTA.

        Thanks,
        Vijay

        • Pankaj Batra says

          @Vijay
          You can claim for travel done alone to your native city, There is no issue in it. If there is no direct flight, first class AC train fare would be exempted between such route.

          • vijay says

            Hi Pankaj,

            But as co. policy says min. 3 day leave is required, I have taken two days only. So if I am claiming LTA for tax benefit, if I am defaulting on IT rules OR I can claim the same?
            Basically I am worrying that if I claim LTA and at later stage I need to pay tax with penalty, just because my co. policy says for min. 3 day leave.

            • Pankaj Batra says

              @Vijay
              LTA exemption should be taken only with employer. If your claim does not fit into their requirements, it would be rejected and no tax benefit may be provided.
              If you are asking about claiming exemption at the time of return filing, there is no column in ITR to claim for LTA exemption. If you do it by reducing taxable income, there would be difference in what has been stated by employer in Form-16 and what you declared. In that case IT office may send you notice and then you would have to prove why exemption was not taken with employer.

  16. Vijay Kumar Tiwary says

    Hello pankaj
    Hope you resolve my doubt also.
    I traveled from LUCKNOW-PATNITOP by taxi via DELHI & KATRA & return.
    Can I be allowed for the tax exemption for taxi fare.
    Or train up to what amount?

    • Pankaj Batra says

      @Vijay
      You can deposit taxi fare receipts to your employer, but maximum tax exemption would only be available for first class AC train fare only (Lucknow to Jammu) and public bus fare from Jammu to Patnitop. First class AC on way fare would be around Rs 2000 for such route for one person.

1 10 11 12



If you have a Question, Click here to Ask!