Submit Tax Saving proofs to Employer to claim LTA by March 31st

Salaried individuals must normally submit proof of expenses and investments to their employers in order to claim deductions and exemptions under various provisions of the Income Tax Act.

If you are debating whether or not to provide proof to your employer now so that you can claim the deductions when completing your income tax return (ITR), you should be aware that it can cause problems in specific situations. Certain exemptions are easier to claim through your employer, avoiding difficulties and saving time. One such exemption is the Leave Travel Allowance (LTA).

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LTA, which is typically included in the salary, pays for your vacation travel expenditures. Exemptions also apply to expenses incurred by family members travelling with an employee. 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 normally must submit documentary evidence of incurred travel expenses to their employers by specified deadlines.

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Who can claim LTA and what are the eligibility criteria?

Only persons who meet specified qualifications are eligible for LTA exemption. One of the tax experts states, “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 out of four. The current timeframe for claiming LTA is 2022-2025.

Keep in mind that the claim cannot exceed the actual amount spent on the trip or the amount paid as LTA by your company.

The exemption is available for the shortest route between the origin and destination. Furthermore, there are specific regulations governing the travel routes and ticket classes for which the exemption can be claimed.

Both, private and central government employees are eligible for LTA exemption. In the private sector, an allowance is typically granted for 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 these rules and regulations.

According to tax experts, the exemption for city-related travel expenses is not authorised. Furthermore, airport transfers, such as those from the airport to the hotel and vice versa, may be prohibited.

How to claim LTA?

On the question of how to claim LTA, tax experts state, “There is no defined process to claim LTA exemption provided in the Act or Income-tax Rules, 1962.” However, Rule 26C of the Rules requires employees to submit evidence of expenditure in Form 12BB to determine their tax exemption and taxable income.”

Another tax expert explains, “For LTA, employees must follow the processes outlined by their employers and submit all invoices. This may involve a minimum number of days of leave for eligibility and the submission of necessary documentation such as tickets, boarding passes, or invoices.”

Valid proofs (airfare/railway tickets, boarding passes, travel bills, etc.) must be presented to the employer once the investment evidence collection windows are open, according to the employer’s timelines and process. Employees should also complete Form 12BA and show the LTA amounts claimed, along with submitting the proofs.

Can LTA be claimed while filing income tax returns?

If you are eligible for LTA, it is preferable to submit all required documentation to your employer and claim the exemption to avoid the headache of further inspection.

If you do not provide documentation of investments and expenses, it will be assumed that you did not incur these expenses. In such instances, the employer will deduct a greater TDS from the salary.

You will still be able to claim LTA when filing your income tax return for the financial year.

If an employee forgets to do so, there is no restriction in the income tax law or in the income tax filing utilities that prevents them from claiming the LTA amount directly while filing the ITR.

The Act and Rules place no restrictions for employees directly claiming LTA exemption in their ITRs. The provisions simply require the employer to assess evidence of expenditure in order to exempt income from taxation. As a result, if the employer has not considered the LTA exemption for any reason, the employee can claim it immediately in the ITR.

Challenges of filing LTA through ITR instead of the employer

If taxpayers claim allowances such as LTA when filling their ITR, they may face significant obstacles. This is because the burden for tax deduction rests with the employer upon submission of proof by the employee.

If the employee fails to claim LTA through the employer because the employer did not submit the exemption on Form 16, the income tax department may examine such claims while processing the return.

Employees who claim LTA directly on the ITR may receive notices from income tax authorities to verify their claims.

It will be critical (for you) to demonstrate to the income tax authorities the validity of your claim with all supporting information and that it was overlooked to be claimed through your employer.

An employee should save all applicable travel and expenditure documents to justify the exemption. It is critical to retain the real proof connected to the LTA claim so that it may be presented during the assessment proceedings.

According to experts, salaried employees who are qualified for LTA should present proof to their employers in order to claim it.

It is strongly recommended that the LTA claim be processed through the employer, as this is the right channel because they verify all documentation before passing your claim, providing further assurance of compliance.