Special Cash Voucher LTD Scheme : The Government vide office memorandum no. F.No. 12(2)/2020—EH(A) dated 12 October 2020 announced the Cash Voucher LTC (Leave Travel Scheme) scheme for Central Government employees. The Central Board of Direct Taxes issued a press release on October 29, 2020, to provide a similar scheme & income-tax exemption to non-central government employees, who were not covered by the 12 October Office Memorandum.
Non-central government employees include employees of state governments, public sector enterprises, banks, and the private sector. Thus the LTC scheme & tax exemption is also applicable to employees working with the Private sector, Public sector undertaking (PSU) and State Government.
Terms and conditions for Special Cash Voucher LTC Schemes ?
The LTC scheme requires employees to spend three times the amount of deemed LTC fare on the purchase of goods or services, having a GST rate of 12 percent or more.
The amount must be spent during the period October 12, 2020-March 31, 2021
The payment must be made through a digital mode which includes cheque, UPI, debit/credit card, etc., and required to furnish a copy of invoices to the employer containing GST number of the vendor and GST amount paid.
The employees also have an option to submit a self-attested copy of the invoices in case they want to retain the original copies for their future reference.
If conditions of the LTC scheme are met, the deemed LTC fare paid to the employees will be tax-exempt, certainly removing the condition of mandatory travel.
What is the difference between LTC and LTA?
Leave Travel Concession (LTC) is a type of salary component where your employer is providing some yearly benefit to travel with your family. Usually it is mentioned as yearly component but will be paid on monthly wise.
LTA system , which is followed in the private sector or some of the corporate sectors, the employers generally provide LTA to employees for travel expenses as part of their compensation structure. The company pays to leave travel allowance irrespective of the fact whether the employee can travel or not during the year.
TAX rules related to LTA : The exemption is allowed where an employee takes leave to travel within India and furnishes evidence for the same, subject to full-fillment of conditions prescribed in the Act. In case the proof for travel is not produced, such an amount is then considered as taxable perquisites subject to TDS (tax deduction at source).
Important note : As recently clarified, it is not mandatory for an employee to opt for leave encashment. The employee can avail this scheme utilizing the applicable LTC fare without opting for leave encashment. Further, even though leave encashment is not opted for, the employee will have to spend 3 times the deemed LTC fare.
Similarly, under the LTC voucher scheme, instead of incurring expenses on travel, the employee can now furnish proof for purchases made / services availed and avail of the tax exemption. The tax exemption will be restricted to the deemed LTC fare of up to a maximum of Rs 36,000 per person for a round trip as for non-central government employees, the cash allowance payment of a maximum of Rs 36,000 per person as deemed LTC concession fare, is permissible
Illustration of calculation for LTC ( source : ET) :
Please ask your CA or Tax consultant to take advantage of this special provision, this year, if you fall under the said eligibility criteria Or call us freely at 930-7218766 or 0522-4101776, for any help in the matter.