January 16, 2017

Since the onus has shifted to employers to verify proof from employees, expect more queries

Your organisation might reject the Leave Travel Allowance (LTA) claim, if you had travelled on official holidays, like on a weekend, from this year. The Income-Tax (I-T) Act says the employee needs to be “on leave to be in any other place in India”.

“Organisations those go strictly by the wordings of the I-T Act allow employees to claim LTA only if they had applied for leaves,” says Alok Agrawal, senior director, Deloitte Haskins & Sells.

The salaried class are likely to come under more scrutiny from employers this year. And, all perks like LTA, house rent allowance and interest paid on home loans will come under this heightened scrutiny. The government has made employers responsible for verifying whether the claims filed are according to the law. Earlier, companies went only by self-declaration of employees.

The regulations were changed to counter the Supreme Court’s ruling that employers are under no statutory obligation to collect bills and details to prove the employees have utilised the amounts obtained against claims on travel and related expenses, according to experts. They say the proofs required to claim a deduction could be more stringent now. Employees will also need to submit claims using a prescribed form (12BB).

While most other deductions are straightforward and well-defined, LTA regulations can get complex, depending on how you reached the destination and with whom you travelled.

Single claim for multiple flights: A person can claim LTA only for the travel. Other expenses such as sightseeing and hotel stay are not eligible. For air travel, only economy class fares are considered. The ticket price needs to be equal to or lower than those of the government carrier. If you go by train, you can claim expenses for any class, be it air-conditioned first class, second class or sleeper. In both cases, however, you should have opted for the shortest route to reach the destination. If you are travelling from Delhi to Goa, you should opt for a direct flight or a direct train journey. If you take a connecting flight, the rates should be lower than a direct one.

What happens when you are visiting a place where you need to take multiple flights, say if you are going from Mumbai to Leh or Delhi to Port Blair? Explains Vaibhav Sankla, director at H&R Block: The exemption is limited to the amount spent on travel to the farthest point from the origin by the shortest route. One can, however, claim LTA for travel from one place to another. The individual can, therefore, claim LTA for connecting flights if there are no direct ones available. But, if your vacation involves going to multiple places, you can claim LTA for one trip only. For a travel from Delhi to Jaipur, Jodhpur Udaipur and back, you can get a deduction on travel from Delhi to Jaipur or for the return.

Only for public transport: The government also has regulations on the mode of transport if you have to take more than one to reach the destination. Say, you travelled from Bengaluru to Kedarnath in Uttarakhand, and had to travel by road to get to the destination after a flight. In such a case, an individual can claim LTA only if he had taken recognised public transport — a government bus. You can claim taxi fares as part of LTA only if there’s no bus service available to reach the destination. You will need to check the distance travelled by taxi and can only claim the first class rail fare applicable for that distance.

Fellow travellers matter: The use of family members’ tickets when claiming LTA can be tricky. You can include spouse and children, even those not dependant. “But, it’s limited to two children if they are born after October 1, 1998. This could also be a stepchild or an adopted one,” says Archit Gupta, chief executive and founder of ClearTax.com. It means, if you have three children who were born before October 1998, you can claim for all of them, but only for two born after the date. “If you have twins or triplets, the tax department counts them as one unit,” says Gupta. He also points out exemption can be claimed for parents and siblings only if they are dependent. Daughter-in-law, grandparents or grandchildren cannot be part of an LTA claim.

Carry over, if not claimed: If an employee has not availed of LTA for one or two permitted journeys in a particular block of four years, then he or she is entitled to carry one journey over to the next block. In such a situation, the exemption will be available for three trips in the next block. To make use of this benefit, you need to travel in the first calendar year of the next block. “LTA is the only exemption one needs to claim in a calendar year. The rest are based on the financial year,” says Agrawal. The block applicable for the current period is calendar years 2014-2017. The previous block was calendar years 2010-2013.

[The Business Standard]