Payroll Pedia

LTA Exemption

An employee is entitled to LTA exemption under section 10(5) of Income Tax Act in respect of LTA received for himself and his family (spouse, children, dependant parents, dependant brothers and sisters) for traveling to any place in India.

The exemption is available for 2 journeys performed in a block of 4 calendar years. The current block is January 2014 to December2017.

Proofs to be submitted for LTA Exemption

Original Bills for travel as indicated below along with LTA claim form

• Travel by Air –  Original Air Tickets along with Boarding Pass
• Travel by Train –  Original Train Tickets
• Travel by Cab – Original Invoice for Car Hire, Trip Sheet, receipts for cash payments made.

The following points should be noted

1. The leave travel should be to places within India for leave travel allowance exemption calculation. Overseas travel will not be considered for exemption calculation.
2. Approved leave requisition must be on record of HR department.
3. An employee receives payment under the head of “LTA” each month, however the tax exemption on the same is not available each An employee can claim tax exemption on the LTA amount twice in a “block of 4 years” only.
4. In the event an employee does not claim tax exemption on LTA or claims tax exemption on LTA only once in a block of 4 years, the exemption can be carried forward and availed in the first year of the next block of 4 years. In such a case an employee could claim LTA exemption thrice in a block of 4 years.
5. An employee has to travel in order to claim tax exemption on LTA. If an employee does not travel and consequently does not claim tax exemption, the LTA amount paid to employee will be fully taxable.
6. The maximum LTA amount exempt for tax purpose cannot exceed the amount of expenses actually incurred for the purpose of travel.

7. Travel expenses incurred for an employee’s family members can be considered for tax exemption. In addition, an employee’s parents, brothers and sisters can be considered as family if they are wholly dependent on the employee. Expenses towards food and lodging cannot be considered for tax exemption. Only travel expenses can be considered for tax exemption.
8. The tax exemption of LTA shall be calculated as per the following guidelines:

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The Supreme Court has held that an apprentice or a trainee is not an employee and the employer is not liable to contribute Provident Fund for him or her.

A Bench, comprising Justice Arijit Pasayat and Justice R. V. Raveendran, held that trainees are apprentices engaged under the Standing Order of an organisation or under the Apprentices Act and will not come within the ambit of the Employees Provident Fund and Miscellaneous Provisions Act, 1952. The Bench noted that Section 2 (f) of the EPF Act “defines an employee to include an apprentice, but, at the same time, makes an exclusion in the case of an apprentice engaged under the Apprentices Act or under the Standing Orders. Under the Model Standing Orders an apprentice is described as a learner who is paid allowance during the period of training.” Therefore, employers are not obliged to contribute to the PF for them.

The Bench, by its order, upheld a judgment of the Karnataka High Court rejecting the claim of 45 trainees of the Central Arecanut and Coca Marketing and Processing Co-op. Ltd, Mangalore, claiming PF payment. The Regional Provident Fund Commissioner (RPFC), Mangalore, had held that the trainees were employees for the purpose of the Act and the respondent was liable to pay the quantified amount.

The company challenged this order in the High Court and the court concluded that trainees were not employees as per the Act and reversed the RPFC’s order.

Dismissing the appeal, the apex court held that “in the case at hand, trainees were paid stipend during the period of training. They had no right to employment, nor any obligation to accept any employment, if offered by the employer. Therefore, the trainees were apprentices engaged under the “Standing Orders” of the establishment. That being so, the view of the learned single judge as affirmed by the Division Bench of the High Court cannot be faulted.”

194J::
The aggregate of the amounts of Fees for professional services to be paid during the financial year is exceeding Rs. 30000/- hence tax deduction is mandatory @ 10 percent while calculating Fees for professional services.

Tax deduction can be @ zero percent if such amount does not exceed 30000 annual.

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