Can My Wife Claim Her LTA Without Bills or Leave? Understanding Company Policies on LTA

Hi all,

I have a question regarding claiming LTA as taxable. My wife's CTC comes under 1.5 Lakh (Below tax brackets) and the company is deducting Rs. 700 per month for LTA.

My question is, as she doesn't fall under any tax bracket, can she request for her accumulated LTA (taxable) to be included in her salary without providing any bills or taking any leaves? Her company's HR states that LTA cannot be released without taking leaves and submitting bills. Is this correct? (Because I was able to claim my accumulated LTA as taxable in my company upon request). Can a company establish its own policies on releasing LTA?

Since LTA is part of the CTC, what will happen to the accumulated LTA if the employee leaves the company? Should they receive the total LTA in their final settlement? Can a company establish its own policies on this unless it is specifically outlined in the appointment letter?

Please advise me.

Regards,
Bijesh

There are different treatments to LTA. Conventionally, LTA is treated as part of employee benefits and is paid once in two years on production of bills in support of the journey subject to a maximum of one's basic salary. Under this system, LTA is not shown as part of the salary. Most of the traditional HRs follow this system.

On the other hand, LTA is shown as part of 'CTC' by which the total cost to the company is projected, and from which LTA is deducted every month and finally, maybe by the end of the year, the same is summed up and paid back. I understand that the rationale of doing so is to project a high salary. When an employee receives salary (take home), he will get only the net amount after deducting the LTA along with other statutory contributions.

Now, the recent Supreme Court verdict stating that the employer is not bound to collect bills in support of the journey is applicable wherever tax is imposed on such allowances. Under the first concept of LTA also, the employer insists on travel bills for the sanctioning of LTA. There is genuineness in doing so because LTA is an employee benefit and not part of the salary. Under the second concept, certainly, even if the Supreme Court verdict is not applied, the employer cannot ask for travel bills because LTA is a deduction from salary. Any amount deducted from salary should be refunded. It should not be conditional (as to availing leave) also. I used to advise all HRs to work on it so that any benefits shall be put separate from salary and let the offer/pay be small, but the outcome will be good. If anybody challenges the act of an HR deducting an amount not allowed as a permitted deduction in the Payment of Wages Act as is the case of LTA, how will you defend it?

Regards,

Madhu.T.K

Hello!

Can anybody please let me know how many earned/privilege leaves are mandatory to avail the LTA?

Regards, MG

Dear All,

Please go through the LTA claim process.

1) LTA Claim shall be admissible as a reimbursement within the choice pay option exercised by the employee.

2) Availment of 5 days PL / EL is mandatory in case a rebate is being claimed. The rebate will be provided only in respect of traveling expenses incurred during the leave period. Submission of tickets/bills/receipts in original is mandatory for claiming the rebate. The rebate shall be permissible as per IT provisions.

3) Only one claim is admissible during a Financial Year subject to an Income Tax provision. The rebate can be claimed twice in a block of 4 calendar years. The current block of 4 years is applicable w.e.f. 2006. However, Tax exemption will differ as follows:
- Two Exemptions are allowed in the block of 4 years - 2006-2009.
- One Journey in a year is allowed for claiming LTA reimbursement.
- First-class A/C fare for train / Economy class Airfare / state transport tickets, etc., to be attached with the claim form.

Recently, there was a verdict from the Supreme Court stating that to claim LTA, the employee is not bound to submit proof related to the same to the employer.

Employees also have the option to withdraw LTA as taxable components. They just have to inform their employer about their desire to claim the LTA (taxable) in their current salary.

Hi Bijesh,

Thank you for your message.

As you mentioned, in this case, the LTA is included in the CTC as the employer's contribution annually. My wife is new to this company, and everyone in that company is submitting bills and taking leaves to claim the LTA. When I confirmed with HR, he said it's the company's policy. Employees are being compelled to take leaves to receive that amount.

Additionally, there is a medical allowance (which is part of the CTC) being deducted from the monthly salary. They require bills to reimburse this amount, even if tax benefits are not being availed. This process can be completed on a quarterly basis, but without bills, there will be no reimbursement.

Is this a company policy? Is there a way to challenge this?

Thank you in advance.

Best regards,
Bijesh

In our organization, LTA is a part of CTC and is paid on a monthly basis, shown in the salary slip as an earning component. Now, some employees want to have tax exemption for the same. Since it's already paid, considered part of income and tax is calculated and deducted too, our C.A. has advised that at least for this F.Y., we should not consider LTA for Tax Exemption. Is it OK legally, or is there any other solution, this being the last month of F.Y. 2008-09.

Secondly, I have proposed a scheme to be implemented from the next F.Y. 2009-10. At the beginning of the F.Y., blocks to be declared: the first will be only 2009, next will be 1.1.2010-31.12.2011, and a choice to be given to the employee as to whether they want it as income in monthly salary OR as reimbursement on declaration as per the Supreme Court Judgement. Records to be maintained by HR. I'm attaching the formats. Please advise me as early as possible. You can even email me at pari.nerurkar@yahoo.co.in / parinerurkar@yahoo.co.in.

Thanks,
Regards,
Pari

Dear Bijesh,

I have seen a lot of similar cases wherein employees join companies finding that the salary offered is very high but later on they understand that the amount offered was the estimated cost of the company due to their employment! I am totally against this present concept, the so-called CTC. In the past, all these items, viz, LTA, Medical Reimbursement, etc., will be taken as 'other benefits' available to an employee whereas actual salary (certainly gross salary) will only be offered. One can easily calculate the net take-home by deducting the statutory contributions towards EPF/ ESI, TDS, etc. Now it is not possible. Now, even the gratuity, which becomes due only when he leaves (that also after a minimum service period of five years), is also shown as part of the package and every month an amount is deducted!!! This is going to be yet another issue before such new generation HRs because if anybody claims the amount so deducted even before five years of service, the employer will be bound to pay it without any compromise. The very concept of CTC itself is cheating, and I had earlier put my view in an article titled "CTC vs BTC," which is available on my blog at the following link:

http://citehr.com <link updated to site home>

If LTA is a part of salary, and every month an amount is deducted, then it is to be paid irrespective of travel and production of travel bills. Similarly, if medical reimbursement is deducted, the employee should get it back. On the other hand, if these are not shown as part of salary and not shown in the payslip, then the HR can demand supporting bills.

Regards,

Madhu.T.K

Dear Friend,

Based on my knowledge, most organizations provide an IT Declaration form when an individual joins the organization. This form includes an option to choose whether you want to claim your medical and LTA allowances monthly or based on actual expenses by submitting proof to avail of tax benefits. If an employee is not in a tax bracket, they can claim all allowances monthly without the need to submit any bills.

With kind regards,
Nitin.

I agree with Nitin. As per the new order passed by the Supreme Court of India, we can claim LTA even without submitting the proof of journey till 15,000.

Good evening to all,

Can anyone let me know what does tax reimbursement and tax rebate mean as I am new to the corporate world and unfortunately confused? What happens in this procedure?

Also, I would like to know, from an employee's point of view, what would be best from the employer's side - Is it good to add LTA allowance on a monthly basis or deduct it and then pay it later? In the deduction part, after a year or so, shall we get our money deducted back? What do we need to do for that? Do we have to submit our bills to HR?

Also, if it's added in CTC and provided on a monthly basis, can we get the amount back whenever we go for a vacation? How can we save tax on the basis of LTA when it is added in CTC? In such a situation, to whom do we have to submit our trip bills?

Kindly help me with my above queries.

Rashmi
rashmi2b@gmail.com

Hi,

I think in Mr. Bijesh's case, there is no classification of employees. So, while deductions are made, they are done for all employees, and deducting Medical reimbursement & LTA is useless because the employee doesn't fall under the IT purview. So, if not claimed, I think they must return it at the end of the financial period.
I also very much agree with Mr. Madhu.
In CTC, you can mention employer contributions like ESI, EPF, and bonus, which have to be given, but they may vary. However, other benefits like Medical Allowance & LTA must be mentioned as other benefits because if the employee wants to claim them, then he/she can avail of the benefits, and if not, the management can deduct the TDS as per the available source.

Regards,
Ramnath