LTA Confusion: Can You Claim It Without Taking Leave During Company Holidays?

Dear Seniors, Is it mandatory that for availing the benefit of LTA, an employee should have taken leave? If the employee had traveled during company holidays, can the employee claim LTA for this period?

Thanks in anticipation...

What is the meaning of LTA? That itself will help you solve your query to some extent. Moreover, what is the duration of company holidays? Is it sufficient for vacationing?

Warm regards.

Understanding Leave Travel Assistance (LTA)

The very name Leave Travel Assistance itself suggests that the facility is available only while availing leave. In my view, the employee should avail leave to travel to the destination declared under the LTA policy of the company.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

LTA/LTC Benefits and Exemptions

LTA/LTC is a monetary benefit that an employee receives from their employer for proceeding on leave to any place in India. Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B, provides for the exemption and outlines the conditions subject to which LTA is exempt, as follows:

• The employee should take leave from their company.
• They should actually travel.
• The necessary travel documents must be submitted as proof that the travel has taken place.

Regards,

Mr. Keshav has answered it beautifully. The key point is that the employee shall take leave from the company. He/she shall actually travel. This is important to take any benefit under LTA rules; otherwise, any amount paid becomes ex gratia and will be fully taxable in the hands of the employee.

Thanks,
Regards,
Pankaj Patodi
CA

I have missed the second part of Prashant's query regarding whether the LTA benefit shall be allowed to an employee who visits a place during holidays. In my view, it depends on the company's policy. In the absence of any clear permissible provision in the company's policy, the LTA shall be admissible to an employee only while availing leave since leave and holidays are technically two different conditions of service with different implications. Secondly, the name of the facility is "Leave Travel Assistance," not "Leave and Holiday Travel Assistance."

Regards,
B. Saikumar
Mumbai

My to-the-point answer to the querist is as follows:

It is not mandatory for availing the benefit of LTA that the employee should have taken leave. LTA is not a mandatory payment. The company can have its own rules and regulations. The company can have any nomenclature for such monetary payment.

LTA can be claimed by an employee even if they have not taken any leave, as mentioned above. So, traveling during company holidays does not matter.

However, if an employee wishes to avail of IT exemption, they should take leave from their company, actually travel, and submit necessary travel documents as proof that the travel has taken place.

LTA payment and LTA exemption under IT are two separate subjects.

Regards,

I appreciate your answer, which is technically correct, especially in the case of certain private sector companies where LTA is just a perquisite added to CTC. In certain such companies, the payment is done automatically; inasmuch as one need not even "apply" for it. However, in PSUs and Government service (as well as certain established private companies), it's of the IT-compliant type as referred to by you (quoted below).

Here, it is allowed only on:
- Upon application on a prescribed format along with the applied leave period (can include company holidays, if any)
- Block year basis
- Based on mode of travel eligibility and number of eligible dependents
- Upon furnishing proof of travel
- Misuse or false declaration is a punishable offense under the rules of the company

This is not to contradict your opinion but to supplement it.

Warm regards.

Leave Travel Allowance (LTA) and Leave Requirements

There is no restriction regarding the number of days of leave one must take to claim LTA. For example, in West Bengal, around the Puja time, there are successive holidays, and an employee may not take PL but still avail of LTA. LTA can be availed during any leave, including study leave, casual leave, and special casual leave.

Eligibility for Tax Deduction

The criteria for being eligible for a tax deduction is that the money must have been spent, and documentary evidence should be available with the employee.

Also, the assessee employer is under no statutory obligation to collect evidence to show that its employee(s) had actually utilized amounts paid towards leave travel concessions/conveyance allowances - Ref CIT v. Larsen & Toubro Ltd. [2009] 181 Taxman 71/313 ITR 1 (SC). The onus of proving that the employee traveled and is eligible to claim tax exemption is mainly on the employee.

Employer's Role in Travel Allowance Claims

Employers, while assessing the travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on their policy. The judgment of the Supreme Court, cited above, has only moved the responsibility from the employer to the employee; the assessing officer can still ask for the employee to provide details of travel.

Regards,
R Bhatnagar

Raj Kumar has put the issue in the right perspective. In the public sector, which is a major stakeholder in the country's economy, LTA is admissible only when availing leave, not on holidays. The employee must necessarily avail leave and actually travel. It is not symbolic as in some private sector industries. Therefore, it is prudent to have an enabling provision in the company's policy in the private sector to avoid conflicting interpretations subsequently.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai