In a major ruling, the Supreme Court on Monday held that Leave Travel Allowance (LTA) is meant for travel within India and will not apply to foreign travel. A division bench of the top court headed by Chief Justice UU Lalit, in a ruling against India’s largest public sector lender State Bank of India (SBI), observed that TDS shall be levied on LTA for the foreign travel of employees.
Leave travel concession (LTC) is allowed for travel within India, the court noted while rejecting an appeal filed by the lender against a Delhi High Court judgment. The Delhi HC ruling said that the amount received by SBI employees towards their LTA claims is not liable for exemption as they took foreign trips.
“It has already been clarified above, that in view of the provisions of the Act, the moment employees undertake travel with a foreign leg, it is not a travel within India and hence not covered under the provisions of Section 10(5) of the Income Tax Act,” the apex court said.
The SC bench observed that the provisions of law prescribe that the airfare between the two points, within India, will be given and employees will receive the LTA of the shortest route between these two places, which have to be within India, according to a Mint report.
Reimbursement for foreign travels is not an absolute right conferred on the officers of the State Bank of India (SBI), the Madras High Court ruled in June this year.
The concession and the facility extended to get reimbursement of the foreign travel expenses, was given by way of an additional facility through a letter and the same was cancelled and the facility was withdrawn pursuant to the orders of the Union Ministry of Finance and the circular issued by the Indian Bank Association.
What is Leave Travel Allowance?
In simple worlds, LTA is an exemption for allowance/assistance received by the employee from his employer for travelling on leave. This exemption is part of an employee’s total CTC (cost-to-company). Also known as Leave Travel Concession, an employee can claim LTA under section 10(5) of the Income Tax Act, 1961, for expenses incurred for travelling when on leave anywhere in the country.
LTC rules
Meanwhile, the Union government in August released Leave Travel Concession (LTC) rules for employees wishing to travel by air ticket. The guidelines, issued by the Department of Post under the Ministry of Communications, explain rules in regard to air ticket booking agents, ticket fare etc.
In a circular dated August 29, the Centre has advised government employees to book air ticket from three booking agents — Indian Railways Catering and Tourism Corporation Ltd (IRCTC), Balmer Lawrie & Company Limited (BLCL) and Ashok Travels & Tours (ATT).
Moreover, they have been encouraged to book flight tickets at least 21 days prior to the intended date of travel on LTC. This is to avail the most competitive fares while also reducing the burden on the exchequer.
