By IT Correspondent
New Delhi, Oct. 30:
With a view to boost spending ahead of the festive season, the Union Finance Ministry on Thursday extended the benefits of LTC cash voucher scheme to non-central government employees like the employees of state governments, state-owned enterprises and private sector.
”In order to provide the benefits to other employees (i.e. non-central government employees)… it has been decided to provide similar income-tax exemption for the payment of cash equivalent of LTC fare to the non-central Government employees also,” ministry said in a statement.
The employees of state governments, state-owned enterprises and private sector will now be eligible to avail LTC cash voucher scheme. Under LTA, the employer reimburses the travel cost of the family of the employee to any place on a holiday or to employees home town. Only the travel cost is reimbursed and the extent of reimbursement is subject to the designation of the employee. LTC is exempted under the income tax act subject to certain conditions. The exemption is allowed for only two travels within a block of four years. The current block is 2018-21.
As travel has become restricted in the wake of coronavirus pandemic, the employees now have an option to avail the cash equivalent of entitled LTC fare and leave encashment without travelling. The employees are now eligible to purchase goods and services in lieu of the tax-exempt portion of the LTC or LTA.
The payment of cash allowance, subject to maximum of Rs.36,000 per person as deemed LTC fare per person (round trip) to non-central Government employees, shall be allowed income-tax exemption subject to fulfilment of conditions, the finance ministry said.
The income-tax exemption to receipt of deemed LTC fare by a non-central government employee shall be allowed subject to fulfilment of the following conditions: a) The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21. b) The employees have to buy goods or services worth three times the LTC and one time the leave encashment amount for the purpose of purchasing non-food items i.e. white goods.
c) Money must be spent on goods attracting GST of 12% or more from a GST registered vendor through digital mode. Such purchase shall be from GST registered vendors or service providers through digital mode. The employee shall obtain a voucher indicating the GST number and the amount of GST paid. The purchases must be made between 12 October, 2020 to 31 March, 2021.
d) An employee who spends less than three times of the deemed LTC fare on specified expenditure during the specified period shall not be entitled to receive full amount of deemed LTC fare and the related income-tax exemption and the amount of both shall be reduced proportionately
Those who have exercised an option to pay income tax under concessional tax regime or new tax regime, will not be eligible for the scheme. For example: Deemed LTC Fare : Rs.20,000 x 4 = Rs.80,000, Amount to be spent : Rs.80,000 x 3 = Rs.2,40,000. If an employee spends Rs.2,40,000 or above on specified expenditure, he or she shall be entitled for full deemed LTC fare and the related income-tax exemption. However, if the employee spends Rs.1,80,000 only, then he shall be entitled for 75% (i.e. Rs.60,000) of deemed LTC fare and the related income-tax exemption. In case the employee already received Rs 80,000 from employer in advance, he has to refund Rs. 20,000 to the employer as he could spend only 75% of the required amount.
