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How to Claim LTA and HRA Deductions Together and Avoid Section 142(1) Notices

  • Writer: Dipali Waghmode
    Dipali Waghmode
  • May 27
  • 9 min read

Claiming Leave Travel Allowance (LTA) and House Rent Allowance (HRA) deductions together is a common practice among salaried individuals in India. These deductions help reduce taxable income, ultimately lowering the overall tax liability. However, mistakes or improper documentation can lead to discrepancies in your Income Tax Return (ITR), triggering scrutiny from the Income Tax Department in the form of a Section 142(1) notice. This notice requests additional information or clarification regarding the deductions claimed. To avoid such issues, it’s essential to follow the correct procedure for claiming both LTA and HRA, ensuring all documentation is in order and accurately reported. Explore how to correctly claim these deductions and avoid any complications, including Section 142(1) notices.

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How to Claim LTA and HRA Deductions Together and Avoid Section 142(1) Notices?

To claim both Leave Travel Allowance (LTA) and House Rent Allowance (HRA) deductions together, ensure you meet the eligibility criteria for each and maintain proper documentation. For LTA, keep travel tickets and proof of payment, and for HRA, provide rent receipts, a rental agreement, and proof of rent payment. Report both deductions accurately in your Income Tax Return (ITR), ensuring the amounts match the supporting documents. Avoid double claiming and cross-check with your Form 16 and Annual Information Statement (AIS). By adhering to the guidelines and submitting correct and complete documents, you can avoid triggering a Section 142(1) notice for discrepancies.


Understanding Section 142(1) Notices

A Section 142(1) notice is a formal communication from the Income Tax Department that is issued when there are discrepancies or missing details in your filed ITR. This notice is part of the tax assessment process and is typically issued when the authorities believe that the details in your return do not match the records or require further clarification. For example, discrepancies in claiming deductions like LTA or HRA can trigger such a notice. It’s important to understand that receiving a Section 142(1) notice does not automatically imply a penalty. Instead, it is an inquiry to verify the information provided in your tax return. However, failure to respond adequately to the notice can result in penalties, and in extreme cases, legal action. Properly responding to such a notice ensures that your deductions are verified and that you remain compliant with tax laws.


Steps to Claim LTA and HRA Deductions Together

Claiming both LTA and HRA in the same financial year requires careful planning and documentation. Here are the steps to do so:


1. Understand the Rules for LTA and HRA

  1. LTA: The exemption for LTA is available for travel expenses incurred by you and your family within India. However, it comes with specific conditions. You can claim the exemption only for two journeys within a block of four years. The amount that can be claimed is limited to the actual travel expenses incurred, not for food or accommodation costs.


  2. HRA: To claim HRA exemption, you need to live in rented accommodation and pay rent that exceeds 10% of your salary. You must provide rent receipts and, if your annual rent exceeds ₹1 lakh, the landlord’s PAN details.


2. Maintain Proper Documentation

For both LTA and HRA claims, it is essential to maintain accurate records:

  1. HRA: Ensure you have rent receipts with your landlord’s name, address, and PAN (if applicable), a rental agreement, and proof of rent payment (such as bank statements or UPI transactions).


  2. LTA: Keep all travel-related documents such as tickets (air, rail, or bus) for eligible journeys, proof of payment (e.g., receipts, e-tickets), and leave approval from your employer.


3. Accurately Report in Your ITR

Both LTA and HRA exemptions must be reported in the correct sections of your ITR. For LTA, ensure you report the amount under “Income Exempt under Section 10.” For HRA, report the amount under the “Income from Salary” section. Ensure the claimed deductions match the supporting documents to avoid discrepancies.


How to Report LTA and HRA in Your ITR

When filing your ITR, it’s crucial to report LTA and HRA exemptions accurately to ensure compliance. Here’s how to do it:


For LTA

Report your LTA exemption in the “Income Exempt under Section 10” section of the ITR. The amount you claim should match the travel expenses incurred, as evidenced by your travel tickets and receipts. Make sure the family members for whom you are claiming LTA also meet the eligibility criteria.


For HRA

For HRA, report the exemption under the “Income from Salary” section. The amount should align with the rent you pay and the supporting documents you provide, such as rent receipts and your rental agreement. If your annual rent exceeds ₹1 lakh, you must also include the landlord’s PAN to comply with tax regulations.


Cross-Verify with Form 16 and AIS

Before submitting your ITR, cross-check the exemptions claimed with the details provided in your Form 16 (provided by your employer) and the Annual Information Statement (AIS) available on the Income Tax portal. This ensures that your claimed exemptions are consistent with the records provided by your employer and the tax authorities.


How to Avoid Section 142(1) Notices

To avoid triggering a Section 142(1) notice, follow these best practices:

Be Consistent

Ensure that the details in your ITR, Form 16, and AIS are consistent. Discrepancies between these records can raise red flags with the Income Tax Department, potentially leading to a Section 142(1) notice.


Provide All Supporting Documents

Ensure that all necessary documents are submitted. This includes rent receipts for HRA, travel tickets for LTA, and any other supporting proof. The Income Tax Department may request clarification on these documents, and promptly providing them through the e-filing portal helps avoid delays or penalties.


Avoid Over-Claiming

Claim only the actual expenses you’ve incurred and ensure that you have sufficient proof to back your claims. Double-check that you’re not claiming LTA for the same journey in different years or exceeding the maximum allowed exemption under the applicable rules.


Stay Updated

Tax rules and exemptions may change each year. Make sure you are aware of the latest guidelines regarding LTA and HRA claims, as changes could affect your filing process.


TaxBuddy's Role in Handling LTA and HRA Claims

TaxBuddy is an AI-powered tax filing platform that simplifies the process of handling LTA and HRA claims. The TaxBuddy mobile app helps users track and manage their deductions, ensuring they maintain proper documentation and report exemptions accurately in their ITR. The platform offers step-by-step guidance to help you correctly file for LTA and HRA, reducing the risk of errors or discrepancies that might lead to Section 142(1) notices. Moreover, if you do receive a notice, TaxBuddy provides expert assistance to help you resolve any issues quickly and efficiently.


Conclusion

Claiming both LTA and HRA deductions together can significantly reduce your taxable income, but it requires careful attention to detail. By maintaining accurate documentation, reporting the correct amounts in your ITR, and cross-verifying your records, you can avoid triggering a Section 142(1) notice. TaxBuddy’s mobile app is designed to make tax filing easy, ensuring you stay on top of your deductions and compliance. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.


FAQs

Q1. Can I claim both LTA and HRA in the same financial year?

Yes, you can claim both Leave Travel Allowance (LTA) and House Rent Allowance (HRA) deductions in the same financial year, provided you meet the eligibility criteria for both. For LTA, you must have undertaken a journey with your family within India, and for HRA, you must be paying rent for your accommodation. Both deductions have specific rules, such as the two-journey limit for LTA within a four-year block and the need for proof of rent payments for HRA. As long as you follow these guidelines and provide the required documentation, you can claim both simultaneously.


Q2. What documents are needed for LTA and HRA claims?

For LTA claims, you need the following documents:

  • Travel tickets (air, rail, or bus) for the trip.

  • Proof of payment for the travel expenses, such as receipts or e-tickets.

  • Leave application and approval from your employer (if required).


For HRA claims, the necessary documents include:

  • Rent receipts from your landlord, showing the rent paid.

  • A rental agreement between you and your landlord.

  • Proof of rent payment, such as bank statements or UPI transaction records.

  • If the rent exceeds ₹1 lakh annually, the landlord’s PAN is required.


Q3. What triggers a Section 142(1) notice related to LTA or HRA?

A Section 142(1) notice is typically triggered when there are discrepancies or errors in the tax return filed, especially with respect to LTA or HRA claims. Common reasons for this notice include:

  • Insufficient documentation for the deductions claimed, such as missing rent receipts or travel tickets.

  • Over-claiming deductions without supporting evidence, such as claiming LTA for multiple trips in a year beyond the prescribed limit or claiming HRA for properties that don’t meet the criteria.

  • Mismatches between the income declared in your ITR, Form 16, and the Annual Information Statement (AIS), which can raise red flags for the tax authorities.


Q4. How should I respond to a Section 142(1) notice?

To respond to a Section 142(1) notice, follow these steps:

  • Review the notice carefully to understand what documents or clarifications the Income Tax Department requires.

  • Gather all the necessary documentation, such as rent receipts for HRA and travel tickets for LTA.

  • Respond promptly through the e-Proceedings portal on the Income Tax Department’s website. Ensure that you upload all requested documents and explanations.

If you have made any errors in your ITR, you may need to file a revised return to rectify the mistakes and provide the correct details.


Q5. How can TaxBuddy help with LTA and HRA claims?

TaxBuddy simplifies the process of claiming LTA and HRA deductions by providing an easy-to-use platform where you can upload and manage your documents. The app helps you:

  • Track your claims for both LTA and HRA, ensuring you have all the necessary documentation in place.

  • Generate and file your ITR with the correct deductions and exemptions.

  • Get expert support in case you need help responding to Section 142(1) notices or correcting any discrepancies in your filings. TaxBuddy ensures that all deductions are accurately reported and helps you stay compliant.


Q6. Can I claim LTA for multiple trips in the same year?

No, LTA is limited to two journeys within a block of four years. If you have claimed LTA for one trip in the current year, you cannot claim it again for a different trip within the same block unless it falls within the next eligible year. Ensure that you track your LTA claims to avoid claiming more than the permissible limit.


Q7. Is HRA exempted for self-occupied properties?

No, you cannot claim HRA if you live in a self-occupied property. HRA is only available if you are living in rented accommodation and paying rent. If you own the property and live in it, you are not eligible for HRA exemption. However, if you pay rent for your second property or a house you live in temporarily, you can still claim HRA for that accommodation.


Q8. Can I claim LTA for my family’s travel expenses?

Yes, LTA can be claimed for your eligible family members, provided they meet the tax criteria. The term "family" generally includes your spouse, children, and dependent parents. The travel should be undertaken within India, and you must provide proof for the expenses incurred. Ensure that all family members are eligible as per the Income Tax Act and the journey meets the prescribed conditions.


Q9. Do I need to provide a landlord's PAN for rent below ₹1 lakh annually?

No, you do not need to provide your landlord's PAN if your annual rent does not exceed ₹1 lakh. However, if your rent exceeds this threshold, you must obtain and report the landlord's PAN details to comply with tax regulations. This requirement is in place to help the tax authorities track large rent payments that may potentially be used for tax evasion.


Q10. What happens if I fail to provide required documents for LTA or HRA?

Failing to provide the necessary documentation can lead to the disallowance of the deductions. If the Income Tax Department finds discrepancies or missing documents related to LTA or HRA, it can trigger a Section 142(1) notice for clarification. Additionally, over-claiming deductions or providing false documents can lead to penalties or legal action.


Q11. Can TaxBuddy file my revised return for missing deductions?

Yes, TaxBuddy can help you file a revised return to correct any mistakes or missing deductions in your original ITR filing. The platform allows you to update your claim for LTA, HRA, or any other deductions you may have missed, ensuring compliance with tax laws. TaxBuddy’s expert support also guides you through the entire process of filing a revised return.


Q12. Is it mandatory to submit travel tickets for claiming LTA?

Yes, submitting travel tickets is mandatory when claiming LTA exemptions. You must provide proof of the travel expenses incurred for both yourself and eligible family members. This documentation ensures that the claim is valid and meets the Income Tax Department’s criteria for LTA exemptions. Without these tickets, your LTA claim may not be accepted, and you risk facing penalties or a Section 142(1) notice for missing documentation.




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