Lta taxability

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2012 Dear Sir,

Whether LTA is included in Salary Income on the basis of journey performed or accrual basis.

For example, LTA of an employee of a company was accrued in calender year 2009 but journey was performed in May 2010. Now I have following queries:

1. Above referred LTA will be considered in taxable income of P.Y 2009-10 or 2010-11

2. Now if it is assumed to be considered in P.Y. 2009-10 and exemption is claimed under Section 10(5), then for future period exemption can be claimed being new block will start from 2010.

3. Whether for inclusion of LTA in Salary income, break up has to be done for first 9 months and next 3 months and how it will be done.

Pls. guide on above query on practical basis.

Regards,

Nikhil Jhanwar

Anand Eriwal

Anand Eriwal (Expert)
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12 January 2012 Dear Nikhil,

Your specific queries are resolved as under:

If LTA can be claimed on the basis of journey performed and not on accrual basis. It also depends on the company policy. For eg in the calendar year 2009 you have not not performed journey but LTA is accrued. Then in that case you can very well carry forward that LTA in year 2010 when you perform your journey. You also have option to claim the entire LTA in the year 2009 itself ie say in December 2009 in that case for PY 2008-09, LTA would be fully taxable. However if you claim LTA in the year in which you perform journey then LTA would be exempt and not taxable on production of documentary evidence of the journey performed. If you have claimed in PY 2009-10, the LTA then it would be advisable to claim it before December 2009 since new block would start from Jan 2010 (this would have two advantage, no break up would be required for 3 and 9 months, you will ensure that you have claimed at least one journey in the last block and assuming that other journey is not claimed in the previous block the same can be carry forward and claimed in 2010 block

Querist : Anonymous

Querist : Anonymous (Querist)

12 January 2012 Thanks Sir,

But one doubt I have Whether Income tax law has nothing to do with either LTA is claimed on accrual basis or on the basis of performance of journey, as prevailing in case of salary which is taxable on the basis of accrual or receipt whichever is earlier ?

Anand Eriwal

Anand Eriwal (Expert)
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12 January 2012 If LTA is claimed on accrual basis without performing journey, then it would be taxable under Income Tax Law.

On the other hand if LTA is claimed on the basis of journey performed, then it would be not taxable under Income Tax Law, if you sufficient documentary evidence.

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