Salaried individuals usually have to submit necessary proof of expenses and investments to their employers to claim deductions and exemptions under various sections of the Income-tax Act. If you are contemplating whether or not to submit proof to your employer now as you can claim the deductions while filing your income tax return (ITR), you should know that it can cause trouble in some cases. It is easier to claim certain exemptions through your employers to avoid hassles and save time. One such exemption is Leave Travel Allowance (LTA).
LTA, usually a component of your salary, covers the expenses of your travel during vacation. The cost incurred for family members who travel with an employees is also allowed as exemption. Family members include spouses, children (up to two if born on or after October 1, 1998), dependent parents, and dependent siblings.
To claim LTA, the employee typically needs to submit documentary evidence of the incurred travel expenditure to the employers within specific deadlines.
Who can claim LTA? LTA eligibility criteria explained
Only people who meet certain conditions can get LTA exemption. Shalini Jain, Tax Partner, EY India, says, “An employed person having LTA as a component specified in their salary structure may claim an exemption under Section 10(5) of the Income-tax Act, 1961 (Act)…”
LTA can be claimed for any two years in a block of four years. “The current block for claiming LTA is 2022 to 2025,” says Alok Agrawal, Partner, Deloitte India.
Do keep in mind that the claim cannot exceed the actual amount spent on the travel or the amount paid as LTA by the employer. “The exemption is available for the shortest route from the place of origin to the place of destination. Further, there are defined rules for the travel routes, and class of tickets up to which the exemption may be claimed,” he adds.
Both , private and central government employees are eligible for LTA exemption. “In the private sector an allowance is normally provided towards leave travel , against which an employee can claim the exemption. For government employees, the benefit is in the form of trips and may be subject to further conditions as to the number of journeys or the amount permitted per head, etc. (private) employers have their policy in place in relation to LTA, which besides the above matters pertaining to LTA exemption, may also cover for matters like , compulsory taking of leave for the period of travel rather than using weekends, submitting the original documents such as boarding pass or other proofs, the timing of submitting LTA claims, etc., to have better administrative controls. Employees are subject to those rules and regulations,” explains Kuldip Kumar, Partner, Mainstay Tax Advisors LLP.
Jain says the exemption for travel expenses within the city are not allowed. Further, airport transfers like travel from airport to hotel and vice versa may not be allowed.
How to claim LTA: Check out the procedure
What is the procedure to claim LTA? “There is no defined process to claim LTA exemption given in the Act or Income-tax Rules, 1962 (Rules). However, Rule 26C of the Rules provides that the employees need to submit evidence of expenditure in Form 12BB for the purpose of determining the tax exemption and taxable income,” says Jain.
Neeraj Agarwala, Partner, Nangia Andersen India, says, “For LTA, employees must follow procedures laid out by the employers and submit all invoices. This may include a minimum number of days of leave for eligibility and submission of relevant documentation such as tickets, boarding passes, or invoices.”
Agrawal explains that according to the timelines and process defined by the employer, valid proofs (airfare/railway tickets, boarding passes, travel bills, etc.) need to be submitted to the employer once the investment proof collection windows are opened by the employer. “The employees also need to fill out form 12BA and declare the LTA amounts claimed along with submitting the proofs,” says Agrawal.
“Central and state government employees are generally eligible to claim LTA as per their specific service rules,” says Sujit Bangar, Founder, Taxbuddy.com.
Can you claim LTA while filing your income tax return?
If you are eligible for LTA, it is easier if you submit all the necessary documents to your employer and claim the exemption, to avoid the hassle of more scrutiny.
If you do not submit proof of investments and expenses, it will be deemed that you have not incurred these expenses. In such cases, the employer will deduct higher TDS from the salary.
You will still have the option to claim LTA while filing your income tax return for the financial year. Clarifying it further, Agrawal adds, “In case an employee has forgotten to do so, there is no restriction as such under the provisions of the income tax law or in the income tax filing utilities to claim the LTA amount directly at the time of filing the ITR.”
Echoing the same, Jain says, “The Act and Rules do not provide any restriction on direct claim of LTA exemption in the ITR by the employee. The provisions only specify the obligation of the employer to consider evidence of expenditure to allow exemption of income from taxation. Hence, if LTA exemption has not been considered by the employer for any reason, the employee may claim the exemption directly in the ITR.”
Challenges you may face if you file LTA through ITR instead of employer
Taxpayers may face certain challenges if they claim allowances such as LTA while filing ITRLTA. “This is because the responsibility for tax deduction lies with the employer upon submission of proof by the employee,” says Abhishek Soni, co-founder and CEO of Tax2win.
If the employee fails to claim LTA through the employer as the exemption was not provided by the employer in Form 16, Agrawal explains, the income tax department may raise questions on such claims while processing the income tax return.
Employees claiming LTA directly while filing the ITR may face the risk of receiving notices from income tax authorities to verify the claims, says Jain.
“Here it will be imperative (for you) to prove to the income tax authorities the genuineness of your claim through all the supporting evidence and that it was missed to be claimed through your employer,” says Ritika Nayyar, Partner, Singhania & Co. An employee should preserve all the relevant documents relating to travel and expenses to justify the exemption, she says.
Agrawal says it is important to keep the actual proof relating to the claim of LTA so that these can be produced during the assessment proceedings.
Experts recommend that salaried employees who are eligible for LTA submit the proof to their employers to claim it. “It is strictly advisable that the LTA claim be processed through the employer which is the proper channel since they verify all documents before passing your claim, thereby giving an added comfort on compliance,” adds Nayaar.
