As the coronavirus pandemic hit this year lockdown was imposed in every state of the country. So the economic environment becomes a difficult situation for the employees as well as the government hence to encourage individuals so that they can use their LTA amount the government has come up with Relaxed guidelines. It will also boost consumer demand. The government employees can avail the LTC cash now just came by this they can purchase goods and services in lieu of the tax exam portion of the leave travel concession/leave travel allowance (LTC/LTA). The employees can claim the tax exemption on the travel fare depending on the amount spent by the certifying specified conditions in the scheme. The government of India also extended income tax benefits on the LTC cash voucher scheme to those employees who are not the non-central government, so the scheme was also broad for private sector workers too.
How Govt LTC is different from LTA?
The Finance Ministry said that the government LTC is basically different from the leave travel allowance LTA just like in the corporate sector. The LTC to a government employee will not be eligible unless the employee actually travels, if the employee fails to travel the amount is deducted from his pay and disciplinary action will be liable on the employee. So the money cannot be kept by the employee and paying income tax.
If you are in government employee then you had only two choices which include:
- Travel and spend (which includes hotel, food, etc incidentals)
- Forgo the entitlement not claimed within the date.
Apart from these two choices a third option has also been added ‘spend on something other than travel’. This is because Covid-19 has made it difficult in the current scenario. This is the reason the government has taken this step to provide relaxation to the employees.
Terms of the LTC scheme?
Under the income tax act 1961, LTC/LTA Can be applied for tax benefits as to round-trip journeys in the four calendar years were eligible for the employees. If the employees were unable to travel in the block of 2018–21 the government will provide a leave travel concession cash voucher scheme for central government as well as non-central government employees which also includes the private sector employees. So the employees will have an option for the deemed LTC fare in lieu of applicable LTC for the 2018-21 block. Your tax would be reduced if you Spend a lower amount. If you have opted out of the simplified tax with him, then you will not be eligible to claim tax relief in that scheme. But You can re-opt for the ongoing tax regime to get the benefits which fall under the special scheme.
Under this special scheme, the central government, as well as non-central government and private employees, can purchase any goods and services on GST of 12% and will also get reimbursement accordingly. Many FAQs have been launched in the second set under the cash Voucher scheme for the block 2018–21.
Some of these FAQs are shown here:
LTC cash voucher scheme example
We can say that the scheme is very innovative and essential for taxpayers as well as the economy as a whole. The essential point of this LTC voucher scheme is that even if the employee does not travel he will receive LTC/LTA eligibility as a tax-free allowance subject to various conditions for fulfillment. The employer would get LTC/LTA equivalent without any tax if the employee spends three times of eligible LTC/LTA. The employee must remember that they can only purchase goods or services in order to get 12% of the GST rate and the payment can only be done by digital mode.
Another condition is that the employee or family members who are eligible for LTC/LTA should have their name on the invoice. And they spent should be done in the window of October 12, 2020, to March 31, 2021.
EXAMPLE: Let’s understand it by an example. Suresh is employed in a Digital company and because of the coronavirus pandemic he cannot travel and his family member which includes four members have opted for an LTC entitlement of Rs.80,000. If the amount spent is three times that is Rs.2,40,000 and purchase of goods and services they will be eligible to receive Rs.80,000 without paying any of the text. If Suresh comes under the maximum marginal tax rate of 42.74% then the tax saved would be around Rs.34,000. And in case he would not have opted for the scheme then we will have to pay Rs.34,000 as taxes on the receipt of LTA of Rs.80,000 whether he has spent it on white goods and eligible services.
LTC cash voucher scheme list of items
The LTC Cash Voucher list of items for 12% includes:
List of Items which carry GST 12%
- Preparations of vegetables, fruits, nuts, or other parts of plants, including pickle, murabba, chutney, jam, jelly
- Fixed Speed Diesel Engines
- A two-way radio (Walkie-talkie) used by defense, police, and paramilitary forces, etc.
- Intraocular lens
- Corrective spectacles
- Ketchups, sauces, and mustard sauce but excluding curry paste, mayonnaise, and salad dressings, mixed condiments and mixed dressings
- Bari made of pulses including mungodi
- Playing cards, chess board, carom board, and other board games, like ludo, etc.
- Debagged/roughly squared cork
- Items manufactured from natural cork
- Menthol and menthol crystals, peppermint, fractionated/de-terpenated mentha oil, dementholised oil, Mentha piperita oil, and spearmint oil
- All diagnostic kits and reagents
- Plastic beads
- Glasses for corrective spectacles and flint buttons
- Spoons, forks, ladles, skimmers, cake servers, fish knives, tongs
- Exercise books and notebooks
- Agglomerated cork
LTC cash voucher scheme order pdf
The pdf can be downloaded from below.