in Finance, Income Tax, News |

No need to submit LTA proofs to employer

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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565 Comments

  1. dear pankaj,
    found yuur site pretty informative.would like to ask something.i work in a public sector company.recent wage revision has inluded the leave travel allowance in salary as perks.does income tax act lay down any rule on mode of travel for availing tax concessions eg-rail.ship or air.

    • @Sanjay
      Railways and Air travel both can be reimbursed under LTA rules to a certain limit, Railways to first class AC and Airfare to economy class fare of national carrier (indian airlines)

  2. Very absract and informative. Thank u.

    Please advise me on the following,
    I have received INR 85000 as LTA as monthly instalments in my salary. Employer advised me to claim for tax exemption while filing returns, as the same is paid as monthly installments.
    Please advise me whther i can deduct this amount from the Head salaries,
    TO WHOM I HAVE TO SUBMIT THE BILLS.
    IT dept advises not to attach any thing. But my earnings under salary head in Form 16 and ITR 1/ SARAL 2 shall vary due to the LTA.

    • @Bhaskara
      You can deduct same from head salaries at the time of return filing, but this may create issues as Form-16 numbers and ITR numbers won’t match. IT department won’t have any clue that why there is a mismatch as there is no LTA block on return.
      Why your employer is advising to declare it in return. Its a salary component and employer has to approve the travel and adjust the same in TDS.

  3. Hi Pankaj,

    My LTA entitlement is Rs 56000/- whereas I could submit the invoice / proof only for Rs 50,000/-. My employer says, i am entitled only for the amount of travel proof submitted. Is this correct? As far as I know, I am entitled for entire Rs 56,000 where in Rs 6,000 is taxable for not sumbitting the relevant documents.

    Please advise.

    • @Sanjay
      In case LTA is a portion of your CTC (cost to company), they have to pay full amount to you.
      What they can do is to pay only the amount for which the proofs have been submitted now and pay rest 6000 after deducting tax at the end of financial year.
      So what they are saying regarding rest 6000. Will they pay at end of financial year or won’t pay.

  4. can you kindly answer the query relating to ltc?In case block of four years for LTC rule is not applied for contractual employment for one year,whether IT is to deducted for the entire LTC claim?

    C.vishwanathan

    • @C.Viswathan
      Its not necessary to have same employer in Block of 4 years, so you can avail LTC tax exemption even if you are on contract. But your CTC must have a LTC component to do so.

  5. Dear Pankaj,
    Would like to know is there any maximum limit to lta eligibility in one’s ctc.And how much lta amount is exempted under income tax rules.

    • @Brinda
      The LTA portion is decided by employer as per their policy.
      Some company have max one month’s basic salary and others have a higher limit. So there is no standard rule on that.
      Whole of the LTA amount which has been spent on travel inside India within the rules, is exempted from income tax 2 times in a block of 4 years.

  7. If I make a booking in March for travel in April, is the amount paid eligible for tax exemption?

    • @Advaita
      LTA can only be claimed once travel has been done.
      As you will travel in April, you may submit the to your employer after that.

  8. I am a salaried employee with an indian IT company. This year I have availed tax-free LTA in April, 2010 against my LTA entitlement for FY 2008-09 (i.e. agianst previous block of 2006-2010). Now when earliest can I avail next tax free LTA. Basically, I want to know-

    1) Since , non-taxable LTA can be availed maximum once in a year for one travel only.
    Can it be claimed twice in 1 financial year. i.e. for 2 journeys- dec and jan?

    2) If I travel during December and claim LTA in January, then for which year this LTA claim will be counted- year in which I travelled or the year in which it was claimed for re-imbursement?

    • @Sandeep
      1. LTA can only be non-taxable for max one travel in a calender year, but as financial year runs April-March, most of the employers consider financial year for calculation. As your CTC will have a LTA component, company will not provide LTA two times in a financial year.
      LTA is counted on date of travel and not when you claim it.
      Last LTA block of 4 years was Jan 2006-Dec 2009, so if have availed a tax free LTA in April, 2010, It will be counted in Jan’2010-Dec’2013 block. This is first one in this block, so you can avail another tax free claim next year.
      2. If you travel in Dec and claim in Jan, the LTA will be considered for Dec only.

  9. Hi,
    Very informative article.
    However, I have two queries here:
    1. If spouse and self are unable to travel together to same destination on the same date but the spouse follows to same destination after few days and both return together on same date, then will the spouse’s ticket (onward journey) be eligible for reimbursement?
    In my case, the employer says that only ticket for self n ward journey and return tickets of both can be reimbursed. The spouse’s onward journey ticket cannot be reimbursed.
    2. If one has the air ticket but had lost the boarding pass, then is the ticket itself proof enough for reimbursement.
    In my case, the employer says that although the Supreme Court ruling holds true, we are required to submit LTA proofs, as per the existing law, and which in turn forms part of the standard process. The existing process will be followed until the CBDT releases an official notification in the gazette. Is this correct? Has the CBDT released a notification yet?

    Can you please clarify?
    Thanks in advance for your help!

    • @Maneesha
      1. As per LTA rules, dependent travelers must travel along with head. So employer is correct in this case.
      2. As per latest court rules, there is no need to submit original proofs to employer. But still employers are playing safe as Income tax department has not released any notification for same. Now it depends on employer whether they accept or not.

  10. What if LTA is not the part of the CTC, Can that be claimed separately?

  11. 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.

  13. 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.

  14. 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?

  16. 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?

  17. 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.

  18. 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)

  19. Hi Pankaj,
    Kindly let me know that is LTA getting abolished from April 2011.
    As per the new direct tax code.

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