by Mr.T.E. Gautham, CEO, Hinote Systems, Chennai
As a firm engaged in the business of payroll processing & statutory
compliance related to payroll, we wonder if the tax law governing tax exemption
on Leave Travel Allowance (LTA) is among the most complex tax legislations in
India. Each year organizations face significant difficulty while calculating
tax exemption on LTA when they carry out the year-end tax compliance work.
Let us examine the law and the practice related to calculation of LTA
exemption in this post.
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| Gautham, CEO, Hinote Systems |
The key conditions as specified by Section 10(5) (and Rule 2B) are as
follows.
LTA Payment to Employees..
LTA should have been paid / be payable to an employee if an employee
wishes to avail tax exemption on LTA.
In other words, if an employee does not receive an amount under a
separate head of pay called for example
LTA or / LTC for the purpose of meeting
leave travel expenses, the employee can not avail tax exemption on account of
leave travel.
Also, in any particular tax year (April to March), tax exemption shall be
limited to the LTA (or / by whatever other name the head of pay for the purpose
of meeting leave travel expenses is called) amount which is paid to an employee
in that tax year.
An Illustration..
An employee is eligible to receive Rs. 12,000 in a tax year (April to March ) under the LTA head of pay.
However, the employee can choose not to receive the LTA amount in a tax
year and he or / she can carry forward
the LTA amount to the next tax year.
What is the maximum LTA amount on which tax exemption should be calculated?
If an employee chooses to receive LTA each year (without carrying it
forward), the maximum tax exemption the employee can receive shall be Rs.
12,000 per tax year.
If an employee chooses to carry forward the amount in tax year 1 and
receives Rs. 24,000 under LTA in tax year 2,
his / her LTA tax exemption shall be Rs. 0 in tax year 1 since he did
not receive any amount under LTA and in tax year 2, the maximum tax exemption
he /she can receive on LTA shall be Rs. 24,000.
About Hinote Systems..
Hinote offers payroll services and software to organizations in India. We
currently manage payroll for thousands of employees across customer
organizations all over India.
The firm'scustomer organizations are from sectors such as manufacturing
and services including Information Technology (IT), Business Process
Outsourcing and the social sector. We have significant expertise in payroll and
information technology.
Hinote Systems provides services,
Software Related to Payroll / HR
Web Site: www.hinote.in/blog
Postal Address:
1, Venkatarathinam Nagar Extn,
Second Street, Adyar, Chennai- 600 020
phone: +9144 4330 7244
Nice post! This post gives a better idea. Thanks for the useful information. I hope you will share some more content. Please keep sharing!
ReplyDeleteAccounts Payable And Receivable
Finance And Accounting Outsourcing
Mortgage Processing
Claims Management Services
Nice post! This post gives a better idea. Thanks for the useful information. I hope you will share some more content. Please keep sharing!
ReplyDeleteAccounts Payable And Receivable
Finance And Accounting Outsourcing
Mortgage Processing
Claims Management Services
Excellent post. keep posting like this kind of content Payroll Software India is a leading software company in India. They outsource software. This software is based on cloud usage.
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