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
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Hi Pankaj, You indeed have great knowledge on the subject. Please help on my query :
1) My wife traveled from Bangalore to Delhi (By Air).
2) Wife, me and my parents traveled from Delhi to Srinagar ( By taxi)
3) Wife, me and my parents traveled back from Srinagar to Delhi ( By taxi)
4) Wife traveled back from Delhi to Bangalore (By Air).
The entire journey happened at a consecutive stretch of 9 days.
A) Can single LTA be claimed by wife for all journeys mentioned above (By Air and by Taxi) or whether she can get benefit on her Air travel (Note: Her company do consider Taxi bills).
B) Would my parents be her dependents, and whether she be entitled to get LTA benefit on same?
@Vishal
A) LTA can be claimed for a single journey (with shortest route) with all dependents accompanying.
So as per Govt rules, only below parts can be treated as non-taxable.
1. Bangalore-Delhi return economy airfare for your wife.
2. Delhi-Srinagar return taxi fare for you and your wife (but non-taxable maximum up-to Delhi-Srinagar Economy airfare, as a public transport already exists between the cities).
A single LTA claim may not be acceptable as Bangalore-Srinagar flight-route also exists.
B) your parents cannot be treated as your wife's dependents.
But, again, all this computation employer will be doing, so I would advice you to provide them all expenses. May be they pass more than what you expect. As it depends company to company.
@Pankaj
Can a company dissolve the LTA componenet and disburse the same amount in the monthaly salary (this means now it till be by default qualify as Taxable)?
@Tikka Singh
LTA is a company policy and its not a mandatory component.
In case, the component is still called LTA, but provided monthly, you may claim it for making it non-taxable.
Very informative site, thanks lot
Hi Pankaj,
Could you please clarify on the following scenario?
I traveled from Bangalore to Delhi in July 2009. I didn't claim it as LTA last year. That was the only trip that I made in the 2006-2009 block. I read that I can claim it during the first year of the 2010-2013 block.
I also traveled from Bangalore to Simla in Oct 2010. I want to make this claim as well. Can I do both claim right now?
Thanks,
Sriram
@Sriram
You can carry forward your LTA in case same is not availed in previous block of 4 years.
One LTA can be brought forward and claimed in the first year of the next block.
Thanks Pankaj.
I know that I can carry forward but can I claim both the 2009 and the 2010 LTA now at the same time?
@Sriram
Previous year's claim can not be made now.
New claims must be from current year.
thanks Pankaj
Hi Pankaj,
Have been following your replies here and they have been very informative. I have a query on rules w.r.t airfares. For example, if there is no direct flight from Hyderabad to Varanasi, can one claim Hyderabad - Delhi - Varanasi and the corresponding return path even though it is not the shortest route? Also, is there a stipulation on the minimum number of days for the trip? Can the claim be made for two consecutive working days on travel?
@Sriphani
As per Govt rules, shortest distance route fare will be considered.
Regarding whats the exemption limit on various locations, check air india LTC fare website: http://www.indianairlines.in/scripts/faredisp.aspx. For Hyd-Varanasi it shows around 9200 for one side fare.
Minimum days for trip should be 3 days and leave should have been taken from office on those days.
Thanks a lot Pankaj. That filled a lot of gaps.
Thanks Pankaj for putting up a useful article and responding back to the doubts. I have a question. I have utilized my LTA in Dec '09 which is only once in 2006-09 4-year block. I would like to know if I can claim one more time now in this Dec '10 for the amount less than that of an year's LTA (of '09). I remember carrying forward my LTA amount for a couple of years.
And, can we claim LTA twice for the same year as in my case, logically twice for the same year of 2009 though the second one is in 2010?
Thanks
@Shiva
If one or both claims are not made in previous blocks of 4 years, then it can be carried forward to first year of next block.
E.g. you may claim 3 times in next 4 years. But one has to be in first year only.
LTA cannot be claimed twice in same year, so in 2010, you can claim carried forwarded one and claim rest 2 in remaining 3 years.
Thank you very much for your response. I have another doubt. I see from your answers that the travel should be minimum 3 days. Can this be on a holiday following by the weekend - friday (company holiday), saturday and sunday?
@Shiva
Yes, it can include Saturday, Sunday and public holidays too. But some companies have different policies (like mine has 5 day minimum leaves taken). So better confirm from your employer in advance before availing LTA.
i have one problem regarding the LTA, what is the basic rule for LTA, how many times can i claim in year? and what is four year block ? and how is exmpeted from the IT department in finanacial year? plz. Sugeest me details?
@Harsh
You may claim tax exemption for travel expense max one time in a year and max 2 times in a block of 4 year (current block is Jan 2010- Dec 2013)
Hi Pankaj,
Kindly let me know that is LTA getting abolished from April 2011.
As per the new direct tax code.
@Rahul
LTA will no longer be considered for tax deduction under Direct Tax Code, which will only be implemented from 1st April, 2012.
Read more on DTC here: http://www.pankajbatra.com/india/new-direct-tax-code-dtc-highlights/
Hi Pankaj,
So we shall claim LTA this year (1-Apr-2010 to 31-Mar-2011) & next year (1-Apr-2011 to 31-Mar-2012)?
As if this is getting wiped out from 1st April,2012, so we should claim both the years (2010-11 & 2011-12), so that we may get the tax advantage.
Kindly advice !!!!!
@Rahul
Yes, you must claim LTA both in 2010-11 and 2011-12.
Thanks a lot Pankaj for your advice.
Thanks!!!!!!!!
thanks PankajB ...Very informative site