An Overview Of Special Cash Package LTC Scheme
1. Further to my article Special Cash Package Scheme In Lieu of LTC for Government Employees, I have received several queries related to the applicability of the scheme. The Government vides office memorandum followed by FAQs (Frequently Asked Questions) has clarified issues related to the scheme.
1.1 The Cash Voucher LTC (Leave Travel Scheme) scheme for Government employees has been announced vide office memorandum (OM) no. F.No. 12(2)/2020—EH(A) dated 12 October 2020 followed by clarification memorandums along with FAQs
1.2 In this article, an attempt has been made to compile the FAQs in tune with the relevant Para of the office memorandum for a better understanding of the scheme.
2. FREQUENTLY ASKED QUESTIONS (FAQs)
A. BLOCK PERIOD: – A cash equivalent of LTC, comprising Leave Encashment and LTC fare of the entitled LTC may be paid by way of reimbursement if an employee opts for this in lieu of one LTC in the Block of 2018-21 – Para 2 of OM dated 12.10.2020
|A1||Since the fresh recruits are not allocated block year, can they avail of this scheme?
|A2||If a fresh recruit who is governed by LTC Rules for New Recruits is in his 8th year after recruitment opts for this scheme, can he submit bills having a date of January-March 2021?
Yes, but one block year of LTC/ or one LTC to be foregone to avail the benefits of the Special Scheme.
|A3||Newly joined Government employees are entitled to three Home Town and one Anywhere in India in a Block of four years. How this will be regulated?
The employee may use any one of the LTC available in a Block Year.
|A4||An employee whose workplace and hometown are the same and is eligible for only one all India LTC in one Block Year. If that LTC is exhausted, will he be eligible for this scheme?
No. The scheme is in lieu of one LTC available during the block year.
|A5||If an employee has already availed hometown LTC (only for self) for 2018-19 along with leave encashment, can he now claim LTC cash voucher scheme with LTC for self from the block year 2020-21 and for remaining family members from block 2018-19?
Yes. He can claim to leave encashment as per the scheme provided it does not exceed the maximum limit of 60 days eligible for encashment.
|A6||If an employee is availing Cash scheme against the year 2018-19 (extended till 31.12.2020), can he submit bills from January 2021 to March 2021?
Yes, provided the transactions occurred on or after 12.10.2020 and bills are submitted before 31.03.2021.
|A7||I availed home LTC in 2019. What is my eligibility position for the LTC cash voucher scheme?
This scheme is for the LTC block of 2018-21. Normally, a block contains two LTC fare (home town and anywhere in India). If one has been availed and the other remaining, the same can be utilized for this purpose. Any unutilized LTC of the block of 2018-21 is eligible.
|A8||For those officials having three Hometown LTCs and one all India LTC, can they avail special cash package for the year 2020 in 2021(up to 31.03.2021) and avail LTC for 2021 also in 2021?
The scheme is valid up to 31.3.2021 and is in lieu of the available LTC. An official may avail LTC for 2021 in 2021 provided the same has not been foregone in lieu of the benefits of the said scheme.
B. LEAVE ENCASHMENT: A cash equivalent of full leave encashment will be allowed, provided the employee spends an equal sum. This will be counted towards the number of leave encashment on LTC available to an employee – Para 2(b) of OM dated 12.10.2020
|B1||Whether the individual employee is required to take leave to avail of this LTC- Cash Voucher Scheme?
An individual need not take leave for this purpose nor undertake any travel. This is a scheme in lieu of LTC travel.
|B2||If an employee has already exhausted the prescribed limit of leave encashment for LTC, whether he will be eligible for the scheme without claiming leave encashment?
An employee can avail of this scheme utilizing the applicable LTC fare without leave encashment
|B3||If an employee does not have enough leave or less than the minimum balance of 40 days which is required in his leave encashment, whether he will be eligible for leave encashment in this scheme?
Leave encashment is to be in accordance with LTC Rules. The employee can however avail of the benefit of the scheme without the leave encashment if such encashment is not available.
|B4||An employee wishes to avail of the special cash package without opting for leave encashment. As per records, he has sufficient EL for encashment purposes. Whether an employee can only avail LTC fare without claiming Leave encashment even though he has not exhausted the prescribed limit for leave encashment for LTC?
An employee can avail of this scheme utilizing the applicable LTC fare without opting for leave encashment. Leave encashment is optional.
|B5||Can an employee avail leave encashment for less than 10 days?
The number of days of leave encashment for LTC (10 days or less than 10 days) is to be in accordance with the relevant provisions of LTC rules.
C. ADVANCE PAYMENT & CLAIM SETTLEMENT: An amount up to 100% of leave encashment and 50% of the value of deemed fare may be paid as advance into the bank account of the employee which shall be settled based on the production of receipts towards purchase and availing of goods and services.
The claims under this package (with or without advance) are to be made and settled within the current financial year. Non-utilization/under-utilization of advance is to be accounted for by the DDOs in accordance with the extant provisions relating to LTC advance i.e. immediate recovery of full advance in the case of non-utilization and recovery of an unutilized portion of the advance with penal interest. Para 4 of OM dated 12.10.2020
|C1||Whether any advance will be given like LTC advance?
Yes, an amount up to 100% of leave encashment and 50% of the value of deemed fare may be paid as advance into the bank account of the employee.
|C2||Whether the advance has taken under of the scheme is to be settled within 30 days of disbursal of advance as stipulated under LTC rules.
The Special Cash Package Scheme in lieu of one LTC is to compensate and incentivize consumption by Government Employees and the benefits can be availed up to 31.03.2021.
As this is a Special Cash Package, the rules relating to advance taken under LTC are not applicable in the present scheme. Accordingly, it is clarified that the advance taken under the scheme shall be settled on or before 31st March 2021
|C3||If an employee spends only the advance amount and makes a claim, how this claim will be regulated?
If the reimbursable amount is less than the advance drawn, this would be treated as under-utilization and after calculation of the claim, the balance amount, if any may be recovered from the employee
|C4||Whether a single bill of purchase of goods or services is to be submitted or multiple bills can be submitted?
Multiple Bills are accepted. The purchase should have been done from the date of issue of the OM ie 12.10.2020 till the end of the current Financial Year.
|C5||An employee incurs the expenditure on or before 31/3/2021 based on the invoice. Actual product or service received in April 2021?
The reimbursement is based on the production of an invoice with details of GST. As far as possible, the claim should be made and settled well before 31st March 2021 to avoid any last-minute rush and resultant lapse
|C6||The vouchers/bills to be submitted to avail of this scheme on or before the 31st March 2021. Employees, who are due to superannuate (say) on the 31st December 2020, be required to submit the vouchers/bills before their superannuation i.e. before the 31st December 2020?
Vouchers/bills should be submitted and settled before the date of superannuation in this case.
D. ADMISSIBILITY – The amount on account of fare shall be admissible if the employee spends an amount 3 times of the cash equivalent of deemed fare, on purchase of such items or availing of such services which carry a GST rate of not less than 12% from GST registered vendors or service providers through digital mode and obtains a voucher indicating the GST number and the amount of GST paid- Para 2(e) of OM dated 12.10.2020
D1 Deemed LTC fare: – The deemed LTC fare for this purpose is as follows:
|Sl||Category of employees||Deemed LTC fare (per person Round Trip)|
|(i)||Employees who are entitled to business class of airfare||Rs. 36,000
|(ii)||Employees who are entitled to economy class of airfare||Rs. 20,000
|(iii)||Employees who are entitled to Rail of any class||Rs 6000|
|D2||What are the items which will qualify for reimbursement under this scheme?
Any goods and services which attract GST of 12% and above would qualify. The invoice with GST details should be submitted and payment should have been made through digital mode.
|D3||Can services like interior decoration and phone bills be included?
Any service which is having a GST component of more than 12% is permissible.
|D4||Whether the purchase of goods/services on loan/EMI, will be covered under this scheme?
Purchase of any goods or services which attract GST of 12% and above qualify for reimbursement under this scheme. Purchases on an EMI basis are also permissible.
The purchase should have been affected after the issue of the order i.e. 12.10.2020 and should have an invoice.
|D5||If a defense employee wants to buy a car from the defense canteen, attracting only 14% GST as against 28% GST in the market, can he avail of this scheme?
As per scheme Goods & Services attracting GST of 12% or more can be purchased.
|D6||Whether we can purchase different items under this scheme like we purchase a washing machine, mobile, AC or not?
Yes. An individual can purchase different items that attract a GST of 12% and more. The payment should be made through digital mode.
|D7||If an employee buys a car or any other items or services, whether it is mandatory to submit original bills to DDO as the same may be required for claim the warranty and ownership of the item/service?
No, a self-attested photocopy would suffice. However, the original bills may be produced on demand for information.
|D8||Will payment of premium of already existing insurance policies be covered under this scheme?
The special cash package envisages just of purchase of goods and services with GST of 12% and above made during the period between 12.10.2020 and 31.03.2021. Payment of premium of existing insurance policies does not fall under this category.
However, payment of premium for insurance policies purchased during the period between 12.10.2020 and 31.03.2021 is eligible for reimbursement under the scheme.
|D9||For digital payment, an employee uses the credit card of his / her spouse or any family members?
It is clarified that the invoice which is being submitted for reimbursement under the scheme should be in the name of the employee who is availing of the scheme.
|D10||Can the payment be made by cheque /DD / Banker’s Cheque/ NEFT/RTGS?
|D11||I purchased certain items after 12.10.2020 but before formally exercising my option. Can it be counted for reimbursement?
All eligible purchases on or after 12.10.2020 and before 31.3.2021 can be counted.
|D12||Can receipt be in the name of any dependent?
The invoices of the goods and services purchased as per the scheme may be in the name of a spouse or any family member who is eligible for LTC Fare as declared in the Service records.
|D13||If an employee opts for only deemed LTC fare without the leave encashment and spends less than three times of the deemed fare as has been prescribed to claim reimbursement of the deemed LTC fare, how the reimbursement would be calculated?
The reimbursement, in this case, would be on a pro-rata basis. Since to claim the applicable deemed fare, an employee is required to spend three times of the deemed LTC fare, the reimbursement in the case of expenditure less than the prescribed three times would be l/3rd of the actual expenditure.
E. OTHER RELEVANT POINTS
|E1||Whether there is any prescribed format for applying for this scheme?
There is no prescribed format. A simple application conveying the desire of the employee for availing the scheme, if the advance is required for the purpose the same is to be mentioned.
|E2||If both husband and wife are working in the central government, if one is availing LTC cash voucher scheme for self and spouse and also taking LTC to leave encashment, then can the spouse avail LTC leave encashment separately?
|E3||If a child is less than 5-year-old then he is not eligible for rail fare, will he be counted as a dependent for this scheme?
Yes. Provided the child is eligible as a dependent in accordance with LTC Rules.
|E4||Any limit on the number of the transaction?
As far as possible, the number of transactions may be limited to a minimum extent to avoid any difficulty/delay
|E5||Is this scheme applicable to the Autonomous Bodies?
Autonomous Bodies can adopt the scheme provided they are already implementing an LTC scheme similar to the Central Government’s Scheme, before 12.10.2020.
|E6||As per Special LTC provisions, an employee irrespective of his eligibility can travel by Air to places like Andaman & Nicobar, J&K, and North-East under anywhere in India fare. In this case what will be the deemed fare?
The deemed fare has been calculated based on the normal eligibility of an employee and the special packages would not be applicable for this scheme
|E7||If a particular LTC which is meant to be used for the scheme has been partially availed by either self or members of the family, whether this scheme available and to what extent?
This scheme applies to the LTC fare left unutilized during the Block Year as mentioned in the O.M. dated 12.10.2020.
|E8||An employee having four family members eligible for LTC wants to avail of this facility for less than 4 members. Further, he wants to avail LTC for the rest of the Members later?
An employee can avail of the scheme in partial, i.e. of the LTC of part of the eligible family. Since this is an optional scheme, if the LTC fare of any member of the family has not been utilized for this purpose, those members can avail of LTC subject to extent instructions under LTC rules.
|E9||Is it allowed to do purchases from an e-commerce platform?
Procurement from an e-commerce platform is also permissible provided the relevant invoice/details are submitted
|E10||How spending of 3 to 4 times on purchasing of products will be tracked? Will purchases made online from an e-commerce website be acceptable?
Any purchase with the digital mode is to be supported by an invoice. Based on the production of the invoice the spending is calculated. This scheme intends to encourage every mode of purchase. It is for the employee to choose a suitable digital mode
3. INCOME TAX EXEMPTION TO NON- GOVERNMENT EMPLOYEES: The LTC scheme has been further extended to non-central government employees on October 29, 2020, providing a similar income tax exemption, thereby bringing relief to private-sector employees as well, who are eligible to claim the leave travel allowance.
3.1 Non-central government employees include employees of state governments, public sector enterprises, banks, and the private sector.
3.2 An employee is required to fulfill the following conditions to avail of the benefit under the scheme:
(a) 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;
(b) The amount must be spent during the period October 12, 2020-March 31, 2021.
(c) 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.
(d) 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.
(e) 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.
Mr. X is entitled to the economy class of fare.
The number of dependents as per LTC Rule is 4.
Deemed LTC fare for an individual with a family of four is Rs 20000*4=80,000
Amount to be spent : Rs 80000*3 = Rs 2, 40,000/-
Thus, if Mr. X spends Rs 2,40,000/- or above on specified expenditure for full deemed fare and related income tax expenditure. However, the amount spend is Rs 180000 only, then he shall be entitled to 75% (ie 60000) of deemed LTC fare and the related Income Tax exemption.
In case the employee already received Rs 80,000 from the employer in advance, he has to refund Rs 20,000 to the employer as he could spend only 75 percent of the required amount.
“Thus, this income tax benefit may be considered as a discount on discount on expenditure, which employee has already planned to incur, instead of a reason to incur expenditure.
5. EMPLOYEES OPTED FOR CONCESSIONAL TAX SCHEME ARE NOT ENTITLED: The CBDT said that since this exemption is in lieu of the exemption provided for LTC fare, an employee who has exercised an option to pay income tax under the concessional tax regime shall not be entitled to this exemption.
The legislative amendment to the provisions of the Income-tax Act, 1961 for this purpose shall be proposed in due course,” it added.
(The author may be approached at [email protected])