LTC cash Voucher Scheme – Guidelines, Eligibility and Calculations
Govt of India has earlier announced about LTC (Leave Travel Concession) Cash voucher scheme for central government employees. Now GOI has confirmed that the LTC voucher scheme would be applicable to all employees i.e. central govt employees, state govt employees, PSU sector employees and private sector employees. If you are part of private sector companies, you might be excited about this scheme. What is this LTC Cash Voucher Scheme? Who is eligible for the LTC Cash Voucher Scheme? What are the guidelines about this scheme? How are the calculations done to get income tax exemption with this Leave Travel Allowance (LTA)?
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What is LTC Cash Voucher Scheme?
LTC is Leave Travel Concession / Leave Trave Allowance. Government of India has indicated that central government employees would be eligible for Leave Travel Concession (LTC) Cash Voucher Scheme couple of weeks back. Due to Covid pandemic, there are travel restrictions and hence employees are not able to travel and claim the LTC. Hence Govt of India has announced this scheme where the employees can claim LTC allowance or expenses without travelling but with certain T&C.
Who is eligible for the LTC Cash Voucher Scheme?
Earlier GOI has indicated this is applicable to only Central Government employees. Now GOI has confirmed that the LTC voucher scheme would be applicable to all employees, i.e. central govt employees, state govt employees, psu sector employees and private sector employees. If you are part of IT, MNC, Banking, manufacturing companies, etc. in the private sector, you might be excited about such announcement. However, there are several terms and conditions applicable here.
LTC Cash Voucher Scheme – Guidelines for 2020-21
LTC – Leave Travel Concession which is part of employee salary can be claimed twice in a block of 4 years. Current block is 2018 to 2021. If one cannot claim before 31 March, 2021, it would expire and one need to pay income tax on their LTC / LTA amount. Due to covid-19 pandemic, there are travel restrictions, hence Govt of India has announced that one can claim this LTC even without travelling with some terms and conditions. Here are the guidelines:
- The LTC Cash Voucher scheme is applicable for the period from 12-Oct-2020 to 31-Mar-2021.
- This is an optional scheme only.
- For non central government employees, payment of cash allowance of a maximum of Rs 36,000 per person as deemed concession fare would be allowed as income tax exemption subject to T&C.
- For central government employees, there are specific slabs for maximum LTC concessions (Employee eligible for business class Rs 36,000 per person per trip, employees eligible for economy class Rs 20,000 per person and employees eligible for rail fare Rs 6,000 per person per trip).
- For central government employees, they are eligible for both deemed LTC cash voucher scheme + leave encashment value for that period.
- Employees need to spend 3 times of the value of the deemed LTC fare on purchase of goods and services which carry GST of 12%.
- These purchases should be done only from GST registered vendors or service providers. Means if you buy from non GST or where GST bills are not available, you cannot claim.
- These purchases should be done only in digital mode. If you paid cash, you cannot claim LTC.
- The bills should be for the period from 12-Oct-2020 to 31-Mar-2021 and claim should be made within this period. The bills should be in the name of the employee only.
- The purchase of such goods/ services can be done through multiple bills and the they can be from online ecommerce purchase too.
- The employee has to exercise an option for the deemed LTC fare in lieu of the applicable LTC for the block year 2018-2021.
- If the employee spends less than 3 times of the total value compared to deemed LTC fare, their income tax exemption would be reduced proportionately.
- CBDT clarified that if an employee has opted for the concessional tax regime, they would not be eligible for this LTC cash voucher scheme.
- No TDS would be deducted on the reimbursement of LTC.
- If the employee received an amount in advance which has some excess amount, then the employee needs to return this amount to the employer.
Calculations of LTC Cash Voucher Scheme
Let us see how the computations/calculations done in this scheme.
1) If an employee deemed LTC fare is Rs 80,000 (Rs 20,000 x 4), then 3 times of this amount should be spent = Rs 240,000. If employee spends any amount over and above this, they would be eligible for this Rs 80,000 as full deemed LTC fare + income tax benefit.
2) If the employee spends Rs 180,000 only, then one third of this would be Rs 60,000 would be eligible for deemed LTC fare + income tax exemptions.
3) LTC Cash voucher scheme computation for central government includes leave encashment too. Here is an example about the calculations for them.
LTC Cash Voucher Scheme – How Private sector employees would get benefitted?
Here are simple guidelines for the private sector employees. This could repetition from some of the above points.
1) Private sector employees would not be eligible if they have opted for the concessional tax regime.
2) Employees need to spend 3 times on purchasing goods and services to avail their LTC/LTA. E.g. if you have LTA for Rs 50,000, you need to spend Rs 1.5 Lakhs before 31 March, 2021 by way of purchasing goods / services which have GST by 12% from registered GST vendor/service provider. This way they would get this Rs 50,000 as tax free reimbursement. If the purchase amount is lower, the LTA amount also would be lower to that extent.
3) If the employees have an LTA amount claim of Rs say Rs 80,000, then spending Rs 2.4 Lakhs itself would be appealing task. Senior management employees might have high LTC e.g. 2 Lakhs . In such case they need to spend at least Rs 6 Lakhs. Buying refrigerators, washing machines, mobiles etc. might not be sufficient. They need to go for four wheelers / electric vehicles where it can meet 12% GST criteria.
How this would benefit employees and Govt of India?
The employee would get benefitted by way of income tax, which is like discount of expenditure. E.g. employee is planning to spend Rs 2.4 Lakhs, they would deem LTC fare + income tax exemption to the tune of Rs 80,000 (33%). This is assuming they are eligible for LTC of 80K.
Govt of India expects that this would boost the economy with increased spending + tax income received through GST, thought they provide income tax benefits.
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How to claim LTC Cash Voucher Scheme?
One can avail by submitting a simple application along with relevant bills. One need to ensure that the bill has 12% GST, it should be in the name of the employee and the dates should fall between 12 Oct 2020 to 31 March, 2021. Employees also need to ensure they have NOT opted for concessional tax regime earlier before submitting such application for claim.
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Can i buy ULIPS HDFC Blue chip investment fund which is more than 12 % GST under LTC Cash Voucher Scheme ??
If we are buying a mobile its comes under GST 18% will that be applicable for this is that is also includes under this LTC
I m entitled For economy class fare ofRs 40000. If I purchase goods worth 100000+ 12000 GST How much reimbursement will take place.
Thank you for your reply sir,
I wanted to ask if in addition to the seller’s GST number on the GST invoice, should the GST number of the buyer’s(employee’s) office be entered for Input tax credit.
For e.g. while booking Air ticket for LTC/Official-Tour travel there is a provision for entering the employer organization’s GST number, which has to be entered if the Ticket fare is to be claimed.
Anthony, From buyer side, there is nothing required except submitting valid bills and claiming the LTC. I am unaware of such provision where employer GST number needs to be inputted.
Thank you sir