admin 4/5/2022
Lta Year Slot India
Every business, small or large, has to process and execute payroll. While performing payroll calculations, the concerned team follows a specific set of rules. These rules govern salary payments, tax deductions, PF contributions, and many more.
- Any individual entitled to take the benefits of LTA can take it for traveling in India only. For tax auditing purpose, it is recommended to keep the record of travel in the form of travel proof. The Leave Travel Allowance exemption is available for two children only who are born after October 1, 1998.
- Myth – LTA deduction can be claimed every year. Employees submit LTA bills to their present employers and claim tax benefits every year. This practice is unethical. Fact – LTA deduction should be claimed only twice in a block of 4 years. Employees tend to switch and do not inform their new employers about LTA exemptions claimed previously.
At PIL an open culture and an entrepreneurial environment make working a stimulating, enriching and rewarding experience.
Since there is a lack of specific rulebook for payroll processing, some laws are wrongly interpreted by the businesses. Unawareness of changes to a particular law or regulation adds up to it.
The misinterpretation of law over the years has given rise to quite a few myths about payroll, making the entire process seem intimidating.
Let’s decode the facts about payroll in detail, and then execute payroll accurately.
Myth – PF is calculated only on basic salary
Many employers consider basic salary alone for PF calculations. Since the Supreme Court ruling on PF wages took place on 28th of February 2019, this practice does not hold good anymore.
Fact: PF should be calculated on employee’s fixed salary
The Supreme Court ruling held that the allowances paid by an employer to its employees will be included as a part of basic wages and will be subject to PF contributions.
But, here are some exceptions.
- Variable allowance or allowances that are linked to any incentive for production, resulting in greater output by an employee
- Allowances paid across the board to all employees of a particular category
- Allowances that are paid especially to those who availed the opportunity
- Allowances that formed a part of basic wage and are covered as allowances to avoid deduction and contribution to PF
HRA is not paid to many employees/workers around the country. Also, sometimes it is paid to some employees and not to others by the same employer. So, it stands excluded from PF contributions. Similarly, overtime allowance/bonus/incentives are provided by all employers but not earned by all employees and hence stands excluded too.
Therefore, PF contribution has to be calculated at the rate of 12% of an employee’s fixed wages, including basic pay, special allowance, but excluding HRA, overtime allowance, etc.
Myth – Employees bear PF admin charges
Some employers transfer the cost of managing a PF to employees by making it a part of the CTC. However, this practice is wrong.
Fact – PF charges should be borne by the employer only
PF admin charges are the charges allocated outside of the employer’s PF contribution. The employer entirely bears these charges. So, if an employer contributes 12% of the fixed wages (excluding HRA), 0.5% admin charges will be added to the 12%. This means the total cost to the employer would be 12.5%.
This additional charge should be treated as an expense in the profit & loss of the employer’s balance sheet. The 12% employee’s contribution will be deducted entirely for PF, and no charges will be debited from the employee’s salary.
Myth – LTA deduction can be claimed every year
Employees submit LTA bills to their present employers and claim tax benefits every year. This practice is unethical.
Fact – LTA deduction should be claimed only twice in a block of 4 years
Employees tend to switch and do not inform their new employers about LTA exemptions claimed previously.
According to the Income Tax laws, an employee can claim LTA exemption for only 2 domestic travels within a block of 4 calendar years. The exemption is available only on the travel cost incurred or the LTA received by the employee, whichever is lower.
There is no way for employers to collect information about employees’ previous LTA exemption claims. But, this tax-saving approach might invite trouble for employees.
If an employee has claimed LTA exemption twice in the block of 4 calendar years, they should inform their current employer to avoid notice from the IT department.
LTA exemption is not allowed under the new tax regime introduced in Budget 2020.
Myth – CTC including medical & transport allowance is not outdated
Many employers include medical and transport allowance in the CTC structure. However, this practice is redundant.
Fact – Including medical & transport allowance is irrelevant
In the Union Budget 2018, the Finance Minister introduced a standard deduction of Rs 40,000. This deduction replaced medical and transport allowance tax benefits.
Before 2018, these allowances were a part of the CTC. The employees claimed tax benefit on the medical allowance of Rs 15,000 and a transport allowance Rs 19,200.
Since exemptions were replaced with a standard deduction, making medical and transport allowance a part of CTC is unnecessary. Employers can withdraw these allowances and park the funds as special allowance.
Also, the threshold of Rs 40,000 was increased to Rs 50,000 in the Union Budget 2020.
Myth – Spreadsheet-based payroll is simpler and error-free
Businesses start payroll processing on spreadsheets because there are no initial investments. They try to save their budgets by using manual payroll methods. However, this practice can take a toll in future.
Fact: Spreadsheets are prone to errors
The spreadsheet-based payroll calculations are lengthy and time-consuming. Here are some limitations to this method.
- High chances of mathematical and clerical errors as details are entered manually
- Odds of duplications and omission of entries rises
- Difficult to monitor and update spreadsheets with compliance changes
- Complications in adding and removing employees
- Excessive hours spend by concerned teams on payroll processing every month
- Increase in costs as businesses need to hire skilled folks for payroll calculations
However, more than half of Indian businesses still rely on paper or spreadsheet-based payroll management for payroll processing.
RazorpayX Payroll – Execute your payroll accurately
With constantly changing regulations and the drawbacks of using traditional methods, effective payroll software is the need of the hour.
At RazorpayX Payroll, we have decoded what it means to have an effective payroll system. It processes and executes payroll seamlessly in a single click. It not only calculates salary or compliance payments but also executes payroll.
Let’s see how RazorpayX Payroll combats all the myths about payroll and makes payroll execution – A Cakewalk!
- The software computes employees’ PF contributions at 12% of the fixed wages that includes basic salary, special allowances and excludes HRA
- It includes PF admin charges as a part of employers’ PF contributions and doesn’t deduct it from employees’ salary
- Employers can automatically bifurcate CTC and exclude medical & health insurance components
- Eliminates the usage of spreadsheets by automating the entire payroll process including compliance payments and contractor payments
Moreover, RazorpayX Payroll provides an intuitive and easy to use interface for businesses and their employees. It also provides transparency to employees by making all employee-related documents available to them at all times.
Also, it does away with duplication or omission errors involved in traditional payroll methods and brings down the processing time days to minutes. Since RazorpayX Payroll fully complies with regulations and laws, businesses do not have to worry about decoding and monitoring compliance changes.
Rajiv505
Rajmore22
SUNEELKMASUR
Saurav1314
Harsha Shetty
Roshani.Rathod
rajmore22
Hi All up to what limit the LTA is exempted under I.T. ( e.g. in Rupees ) suppose if one person basis is 45000/- then and his LTA is yearly 90000/- then is it allowed by I.T. RajFrom India
Ashi Rana
As per my knowledge, the LTA is exempted upto Rs. 15000/- per year i.e. Rs. 1250/- per month and is also deemed non- taxable for 2 times in a 4 years. thanks and regards,From India, Solan
SUNEELKMASUR
Dear Raj,LTA (Leave against Travel) has no limit as per Income tax law under section 10 (5) rule (2b). Any person can avail this facility two times in the block of 4 years. Current block is 2010 - 13. There are specific rules need to be followed to get the benefit.
Travel should be performed by the employee or employee and his family together.
Family means spouse, children, dependent Parents brothers & sisters.
Leave for minimum of 3 working days to be taken.
LTA Claim should be approved by HR - (Leave confirmation)
The opted amount will be withhold from monthly salary & reimbursed on submission of bills.
Exemption is available in respect of travel to any one place within India by the shortest route
Exemption is available only towards travel fare and does not include any other expense.
regards
suneel.
From India, Bangalore
rajiv505
In fact, if we look precisely, LTA is leave travel allowance and it is fully taxable under Income Tax Act as it is a fixed allowance.However, LTC is exempt u/s 10(5). there are plenty of rules & conditions prescribed to avail such exemption as described above by Suneel.
But I have never come across any specific limit of exemption for LTC as stated above by some members. I believe it is tax free upto the amount actually spent by employee with proofs submitted (subject to other conditions fulfillment)
Rajiv
From India, Gurgaon
natraj.38
Hi all,LTA leave travel allowance is a perk that is given by the company to an employee and this is usually taken at the end of the year usually Dec. This facility is available to the employee and his family members i.e, spouse and children. All expenses pertaining to this are taken care of the company subject to the limit and the employee producing proof of expense.
As per my knowledge, this would be treated as a perk and taxable.
Please correct me if wrong.
Tks Raj
From India, Bangalore
Premendra Pranay
LTA is Local Travel Allowance . LTC is Leave Travel Concession.
If you mean something else by acronym LTA please clarify.
If you mean Leave Travel Allowance [ or Leave Travel Concession ] , then income tax exemption is limited to Air Economy or AC1 to the shortest route subject to submission of documentary evidence and number of family members eligible etc etc.. There is no restriction on amount which can be paid under this head. Amount paid minus actual spent on traveling ticket is taxable as per the slab. This concession is allowed twice in a block of four years.
If you mean Local Travel Allowance , then daily rate of Rs 50.00 of actual attendance is exempt. The latest daily rate value needs rechecking .
From India, Mumbai
Aruntalwar
Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B, provides for the exemption and outlines the conditions subject to which LTA is exempt. Exemption of Fare Only - LTA exemption can be claimed where the employer provides LTA to employee for leave to any place in India taken by the employee and their family. Such exemption is limited to the extent of actual travel costs incurred by the employee. Travel has to be undertaken within India and overseas destinations are not covered for exemption.
Exemption on Actual Expense - For example, where an employer provides LTA of Rs 25,000, but an employee spends only Rs 20,000 on the travel cost, then the exemption is limited to only Rs. 20,000.
Travel cost means the cost of travel and does not include any other expenses such as food, hotel stay etc.
The meaning of ‘family’ for the purposes of exemption includes spouse and children and parents, brothers and sisters who are wholly or mainly dependent on you.
An individual would not be able to claim the exemption in relation to his parents, brother or sisters unless they are wholly or mainly dependent on the individual. Further, exemption is not available for more than two children of an individual born after October 01, 1998.
This restriction does not apply in respect of children born before this date, and also in cases where an individual, after having one child, begets multiple children (twins or triplets or quadruplets, etc.) on the second occasion. The term “Child” includes a step-child and an adopted child of the individual.
Amount Exempted
1. Journey performed by Air - Economy Air fair of National carrier by the shortest route or the amount spent which ever is less will be exempt
2. Journey performed by Rail – A.C. first class rail fare by shortest route.or amount spent which ever is less will be exempt.
3. Place of origin and destination place of journey connected by rail but journey performed by other mode of transport - A.C. first class rail fare by shortest route or amount spent which ever is less.
4. Place of origin& destination not connected by rail(partly/fully) but connected by other recognised Public transport system - First class or deluxe class fare by shortest route or amount spent which ever is less.
5. Place of origin& destination not connected by rail(partly/fully) and not connected by other recognised Public transport system also – AC first class rail fare by shortest route (as the journey had been performed by rail) or the amount actually spent ,which ever is less.
From India, Delhi
Harsha Shetty
Dear Premendra, LTA (Leave against Travel) has no limit as per Income tax law under section 10 (5) rule (2b). Any person can avail this facility two times in the block of 4 years. Current block is 2010 - 13. There are specific rules need to be followed to get the benefit.
Travel should be performed by the employee or his family together. Family means spouse, children, dependent Parents brothers & sisters.
Leave for minimum of 3 working days to be taken.
Exemption is available in respect of travel to any one place within India or abroad on producing the original bills on Travel. If you travel by Air you need to produce ticket as well as boarding pass of traveler, If you travel by car you need to produce original bill, Trip sheet, Toll gate tickets (in originals). But LTA will be calculated only shortest rout as well as 3 tier train rates.
It is benefit the employee only in terms of saving some amount of income tax
Regards
Harsha
From India, Bangalore
Roshani.Rathod
Lta Year Slot India Pin
For Medical Reimbursement limit is of 15kpa but for LTA there is no limit or it can be fixed amount(eg: 2 months basic salary*12 per annum) given by employer and ultimately part of your CTC breakup.. Correct me if I am wrong...
From India, Pune
Aruntalwar
Lta Year Slot India Latest
Dear Harsha,Proof of travel
Recently Supreme Court has held in the case of Larsen & Toubro and ITI that employers are under no statutory obligation to collect bills and details to prove that the employees had utilised the amounts obtained against these claims on travel and related expenses.
Employers while assessing the travel allowance claims, do not need to collect proof of travel to submit to the tax authorities. Though it is not mandatory for employers to demand proof, they still have the right to demand documentary proof depending on its policy. The Judgement of Supreme Court has only moved the responsibility from the employer to the employee, the assessing officer can still ask for the employee to provide details of travel.
The individual however needs to keep copies for his or her own records. Such proofs are helpful at the time of the audit of the tax return of the individual. Proof of travel could be, for example, tickets, boarding passes, invoice of travel agent, duty slip etc .
During the Fringe Benefit tax (FBT) regime, provision of paid holidays, including travel cost to any place, stay expenses etc. were subject to FBT in the hands of employers and were not taxable in the hands of individuals. Many employers extended the paid holiday benefit instead of LTA.
Now with the elimination of FBT , with effect from. April 1, 2009, paid holiday benefit is fully taxable in the hands of employees and, therefore, employers are reintroducing the LTA element by withdrawing the paid holidays benefit
From India, Delhi1
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