Can We Pay Medical and LTA Allowances Monthly Instead of Annually? Seeking Clarity on Tax Implications

Hi! I am Ravi.

In our company, we have employees paid more than Rs. 15,000/- as basic salary per month, and their medical and LTA eligibility is one month's basic pay per annum respectively. In case the management decides to pay the medical allowance in equal monthly installments, is it okay? For example, if the basic pay is Rs. 42,000/- per month, shall we pay it as Rs. 3,500/- per month along with his monthly salary? For tax purposes, the employee has to produce bills and claim exemption up to a maximum of Rs. 15,000/- per annum. Is it okay?

Similarly, can LTA also be paid on a monthly basis, i.e., Rs. 3,500/- per month instead of yearly? For tax purposes, he should submit bills as per tax rules (2 trips in a block of 4 years). Is it okay?

Please clarify.

Thanks and Regards,
Ravi

Hi,

Yes, you can do that. Take a declaration from employees regarding medical allowance that they will spend this money on medical expenses, and at the year end, collect proofs for the same. For LTA, change the name to LTC.

Regards.