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SBI Liable for TDS on Foreign LTC Benefits
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Supreme Court of Indiataxlabourcorporate

SBI Liable for TDS on Foreign LTC Benefits

October 9, 2026

Supreme Court held that foreign-leg Leave Travel Concession (LTC) benefits are not exempt under Section 10(5) and SBI must deduct TDS on such reimbursements.

Foreign LTC Not Covered Under Section 10(5) Exemption

The Supreme Court ruled that Leave Travel Concession (LTC) benefits for foreign travel are not exempt under Section 10(5) of the Income Tax Act, which only covers travel within India. The case involved reimbursements by SBI to employees for overseas travel, treated as tax-free by the bank.

The Court held that since the exemption is geographically restricted, the benefit conferred was taxable perquisite. Consequently, SBI was held liable for failure to deduct TDS under Section 192. The department’s demand for TDS, interest, and penalty was upheld.

“Section 10(5) must be interpreted narrowly—only domestic travel qualifies”
, the Court emphasized.

Employers offering international LTC must now treat such reimbursements as taxable perquisites and deduct TDS accordingly. This closes a long-standing ambiguity in payroll taxation and impacts multinationals with global mobility policies.

Citations

  • Section 10(5), Section 192, Income Tax Act, 1961
Practice Areas:taxlabourcorporate

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