Madhu.T.K
Industrial Relations And Labour Laws
Nelsonthomas9102
Hr Executive
Ajit1412kumar
Hr -assistant Manager

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Hello Colleague, I have joined XXXX company where i have discovered that we have to take LTA as mandatory component and there are two methods to avail it.
-Complete 1 year calender year and travel and submit the tickets . ( Non Taxable)
-Take atleast 4 EL to get consolidated LTA in January Salary (Taxable)
My question is if i don't travel and want LTA every month in my salary for which i am ok to pay tax as well, is it wrong to ask employer to change their policy and make LTA optional.
Here it seems like they are forcing us to stay for a year since they have LTA amount accumulated every month.
Is this practice legal or right?

Other than statutory salary, all other allowances are purely management prerogative and can be enforced as part of company policy. LTA is not part of your salary but it is an allowance falling outside the salary. As such it can be paid annually. It is non taxable in 2 years when you submit the bills in support of your travel. It is taxable if you claim it annually and without undertaking any travel and without submitting bills. In this case, it becomes a taxable allowance. This is the practice that is followed by all companies. I have not come across with any situation where LTA is claimed monthly.
Hi Madhu,
Thanks for your response. My point was can i ask the employer that i want to opt out of LTA and the amount to be credited to my kitty every month.
Lets say my gross is 15000 and 1500 per month LTA is taken out .. my net will be 13500 ( please avoid other deductions).
So even employees with very low pay have to go for LTA. My annual CTC is under tax exemption then why i need LTA in that case.
Should LTA be applicable to all ?

Normally, LTA will be part of salary of those whose salary comes under taxable bracket. Moreover, LTA will not be part of gross salary but being annual component, it will be outside salary break up but,obviously, under the CTC.
LTA and any other allowance, the payment of which depends upon happening of any incident/ expiry of a time (as in this case, one year of joining) should not be part of gross salary. This will not be considered as salary for deciding whether the organisation is adhering to the minimum wages policy of the Govt. Again, LTA should not be deducted from the monthly salary. If deducted, it is violation of Payment of Wages Act.

Hi Ajit,
From what I see you can ask your employer to pay the LTA as a salary component to you every month in your salary stack. It is up to you on whether you want to use it for a vacation.
If you do not avail the vacation option, it just remains as a taxable component and anyway as your CTC does not fall under the taxable bracket, this does not matter.
As for having to avail 4 ELs to get a consolidated LTA in the January salary, this does not seem correct.
Normally at least 1 EL should be applied to avail tax exemption on the LTA received. But this is only for tax exemption and has nothing to do with receiving the LTA itself.

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