Claiming LTC exemption in ITR

Question BankCategory: Income TaxClaiming LTC exemption in ITR
Sanjay Singh asked 8 months ago

I could not submit the travel tickets and other documents to my employer for availing LTC in time upto 20th March 2021. and now my employer is not accepting my documents for LTC exemption and will treat LTC allowance as taxable will deduct TDS. As per govt notification, deemed LTC is allowed for purchased made upto 31st March 2021 then How to claim LTC for purchased done between cut off date provided by employer and 31st March 2021. Can I claim LTC directly in ITR. Some people says that LTC can be claimed only through employer (form -16) but due to running salary for march month employer is not accepting documents for purchases done after 20th March for deemed LTC exemption. Can I claim this deemed LTC exemption at the time of filing ITR?

1 Answers
Rabindra answered 8 months ago

Expenses done as per LTC cash voucher scheme is deemed LTC. This exemption is allowed for purchases of goods & services (having GST rate 12% or more) from 12th October 2020 to 31st March 2021, subject to certain conditions. Exemption for Leave Travel Concession (LTC) is available to an employee only if the employee incurs the relevant expenditure against the LTC amount received from the employer. Employer has to deduct TDS at the time of paying salary to employees as per provisions of Income tax Act. 
Employer may have set a cut off date for submission of related documents and savings etc for claiming various deduction and exemption for deduction of TDS (which will reflect in form -16). So in case an employee fails to submit such relevant documents within the time allowed by employer or in case employer fails to take into account the documents submitted by the employee, Then TDS is deducted by employer without considering such exemptions and deductions..But in this case  employee can claim tax benefit while filing ITR. IF you have already incurred the eligible expenditure to claim the exemption of LTC, it is open to you to claim the LTC as exempt while filing your ITR and claim refund of excess tax deducted.
 
Whether an allowance is exempt or not is not dependent on the action of the employer but is dependent on whether the employee has incurred the relevant expenditure. The role of an employer is to deduct the appropriate tax and which is not the same as deciding whether a particular allowance is taxable or exempt in the hands of the employee.
Since you could not submit the relevant documents in time and therefore the employer will treat this allowance as taxable for the limited purpose of tax deduction and deduct tax on it. As you have already incurred the eligible expenditure to claim the exemption of LTC, it is open to you to claim the LTC as exempt while filing your ITR and claim refund of excess tax deducted.
 
Please note that you may get a notice from the income tax department asking you to explain the discrepancy between taxable salary as reported by your employer and as claimed by in your ITR. So please preserve the relevant documents so that you can explain the reason for the difference.

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