I could not submit the relevant documents for availing LTC in time and therefore the employer will treat this allowance as taxable for the limited purpose of tax deduction and deduct tax on it.
Trupty Nayak
Answer: Exemption for certain allowances like Leave Travel Concession (LTC) and House Rent Allowance (HRA) is available to an employee only if the employee incurs the relevant expenditure. It is the responsibility of the employer to deduct appropriate amount of tax while paying the salary to the employee.
While determining the tax liability of an employee, the employer is required to take into account all the exemption and deduction which an employee is entitled to, based on the documents submitted by the employer. So in case an employee fails to submit the relevant documents or the employer fails to take into account the documents submitted by the employee and deducts tax, he/she can still claim tax benefit while filing ITR.
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.
Balwant Jain is a tax and investment expert
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