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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Just wanted to say HI. I found your blog a few days ago on Technorati and have been reading it over the past few days.
Pankaj,
We need not submit the proofs to employer or we need not submit to income tax itself.
They have no right to deduct tax if we dont submit any proof ??
Subhash,
Employee can't ask us for proofs while clearing LTA claim and so can't deduct tax on claimed amount. But income tax authority can ask individual for a proof in case of scrutiny.
Hi Pankaj,
Is this relflect for 2008-09 year or next year??
Since we already submitted proofs to my company. Is there any official website where we can get more information ?
Regards,
Srinivas
Hi Pankaj,
Thanks for sharing this information, do you have the printed order from the supreme court ruling to withdraw supportings from the LTA thing,,, employers want to see those before HR implements it please. Send that to hemal.1973@gmail.com
Thanks
Hemal,
Please find the court order here:
http://courtnic.nic.in/supremecourt/temp/ac%2099305p.txt
Hi,
I have a question I have opted for LTA and my company says to provide the bills by 15 of any month but I am travelling on 17 March.I have to avail this LTA in this financial year only.Can I submit my bills at the time of filing return in July?How will I get the reimbursement of this LTA which I have already declared.Is it necessary to provide bills to Employer only in order to get exemption of Tax.
Please help.
Thanks in advance
Aparna Pandey
Aparna,
You should provide LTA bills to your employer before 31st march and they should do your tax calculations accordingly and deduct tax in march salary.
Employer can reimburse LTA taking it as taxable first and then they can adjust tax in march salary when you submit your reimbursement documents.
While filling return you can not submit anything with return form. So you will have to do it before 31st march.
Dear Mr Pankaj
This is ref to the article below which was published in ref to the Supreme court ruling on the LTA by DECCAN HERALD ON 2.2.09.
No need for proof to claim LTA: SC
DH News Service, New Delhi:
The Supreme Court has held that the Income Tax authorities cannot ask the government organisations and private companies to furnish proof in support of tax exemption availed by their staff on leave and travel allowance (LTA) and monthly conveyance allowance.“There is no circular of Central Board of Direct Taxes (CBDT) requiring the employer under Section 192 of the Income Tax Act to collect and examine the supporting evidence to the declaration to be submitted by an employee(s),’’ said a bench of Justices Altamas Kabir and S H Kapadia.While clarifying the ruling, the bench said the beneficiary in the case is an individual employee under the section 10 (5) and the employer is not bound to submit it to the IT department.
The apex court dismissed an appeal filed by the Commissioner of Income Tax that had asked Larsen and Toubro Ltd and ITI to furnish the details of the travel expenses incurred by the employees to avail LTA.According to the IT Act, if claims on LTA and conveyance are not supported by journey bills, they will be taxed. But if bills such as air tickets, rail tickets, taxi vouchers, hotel bills and other expenses on food and entertainment are submitted, there will be no tax cut.On an LTA allowance of Rs 1 lakh, if documentary proof of bills are submitted only for Rs 50,000, then tax is applicable on the rest of the amount.The IT Department had argued that the companies and organisations are bound to collect the documentary proof to show that the employees had actually utilised the amount meant for LTA and conveyance allowance.The companies had defended their act by saying that tax exemption is given on the basis of the documents submitted on their travel by the employees and tax is deducted if travel proof is not submitted.
Again with ref to this particular article below they have published that the taxi vouchers , hotel bills, and expenses on food and entertainment can be submitted for deduction for tax.
According to the IT Act, if claims on LTA and conveyance are not supported by journey bills, they will be taxed. But if bills such as air tickets, rail tickets, taxi vouchers, hotel bills and other expenses on food and entertainment are submitted, there will be no tax cut.
Could you please let me know whether this was an error.
I have already pointed out to them in the mail but there is no response from them.
Just wanted to know. If I dont submit the bills for availing the LTA will my employer deduct the tax on the entire amount.
If you don't submit the bills but claim the LTA by submitting reimbursement forms, they can not deduct Tax. But if you don't claim LTA then they can deduct tax.