LTA claims of employees & Obligation of employers for TDS Compliance
A pertinent question is whether an employer is expected to verify the evidences supporting the Leave Travel Allowances (LTA) claims?
The answer lies in Circular No. 8/2013 issued by the CBDT. The Circular provides guidelines for employers regarding their obligations while verifying LTA claims.
Obligations of the employers as per the circular:
1. Proof of Travel:
Employers should verify that the employee has submitted evidence of travel, such as tickets, boarding passes, or other relevant documentation.
2. Reasonable Care:
Employers are expected to conduct basic checks, but they are not required to scrutinize the authenticity of the documents beyond this.
3. TDS Compliance:
If adequate proof of travel is not submitted, the employer must consider the LTA amount as part of the taxable income and deduct TDS accordingly.
4. Focus on Employer’s Role:
The Circular emphasizes the employer’s responsibility to ensure compliance but also limits their liability to reasonable verification.
Note: This circular does not align with the Supreme Court’s judgment in the Larsen & Toubro case (Civil Appeal No. 993 OF 2005). The circular’s directive places an additional compliance burden on employers that the Supreme Court’s decision had deemed unnecessary.