pri Tax Exemption For LTA Under Special Cash Voucher LTC Scheme Tax Exemption For LTA Under Special Cash Voucher LTC Scheme

1. The Government vide office memorandum no. OM No F. No 12(2)/2020-EII (A) dated 12th October 2020 announced the Cash Voucher LTC (Leave Travel Scheme) scheme for Central Government employees.

1.1 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.

1.2 Non-central government employees include employees of state governments, public sector enterprises, banks, and the private sector.

1.3 Thus the LTC scheme & tax exemption is also applicable to employees working with the Private sector, Public sector undertaking (PSU) and State Government.

2. SPECIAL CASH VOUCHER LTC SCHEME AT A GLANCE: 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.

2.2 The details of special cash package scheme has been brought out in articles Special Cash Package Scheme In Lieu of LTC for Government Employees & An Overview of Special Cash Package LTC Schem

3. TAX EXEMPTION FOR LEAVE TRAVEL ALLOWANCES (LTA) The government LTC is quite different from the LTA system being followed in the private sector or some of the corporate sectors . In such organizations, the employers generally provide LTA to employees for travel expenses as part of their compensation structure.

3.1 The company pays to leave travel allowance irrespective of the fact whether the employee can travel or not during the year. The exemption is allowed where an employee takes leave to travel within India and furnishes evidence for the same, subject to fulfillment 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).

3.2 As recently clarified, based on FAQ no.3 dated November 25, 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.

3.3 The implications would be no different 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.

3.4 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

4. ILLUSTRATION:

(a) Mr. A is an employee of a corporate sector under the LTA scheme
(b) LTA amount based on salary structure is Rs 1,50,000
(c ) Eligible Family Members (as per Income Tax LTC Rule) 4
(d) Maximum benefit (36000*4)

The guidelines of the LTC scheme for non-central government employees provide a maximum benefit of Rs 36,000 per person.

Rs 1,44,000
(e) Amount need to spend on purchases as per the specified scheme (3 times of deemed fare (maximum benefit)) = 144000*3  

Rs 4,32,000

(d) Taxable LTA amount (1,50,000 – 144,000) Subject to condition that Mr. A spend Rs 4,32,000 for specified purchases Rs 6,000
(e) LTA Exemption in case of less amount spent on the purchase Suppose Mr. X purchases only for Rs 2,00,000/- LTA exemption will be proportionately reduced (144000/432000*200000) Rs 66666
(f) Taxable LTA in case of less amount spent on the purchase (150000-66666) Rs 83334

Disclaimer: The interpretation of the provision and strictly the author’s view and for informational purpose only. It does not constitute professional advice or recommendation for claiming LTA exemptions

The author can be approached at caanitabhadra@gmail.com

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127 Comments

  1. MANSI says:

    FAMILY OF 4,BUT 1 KID IS BELOW 6 YR.WHAT WILL BE MY EXPENDITURE FOR REIMBURSEMENT,IF I AM NOT PAYING TICKET (FAIR) FOR A MEMBER BECAUSE HE IS UNDER AGE.

  2. Chetan Sanghi says:

    Hi Anita

    My company is not allowing me to claim LTC Cash Voucher. They are saying window was till 10 Mar 2021.

    I have properly spent and have the receipt. Can this be claim in any other way if company does not allow it?

    Please help/advice.

    Thanks.

  3. Jignasha says:

    If I ordered t.v on flipcart as on 31.03.21 and payment also made by net banking but invoice date reflect 03.04.21. M I eligible for LTC cash benefit???

  4. Raghavan says:

    Whether the amount paid towards RTO Life tax for vehicle be claimed as exemption under new LTA rules (special cash package scheme)?

  5. kavin says:

    For private sectors , they have closed the submission of bills by March 15th itself , how and where to submit the bills for later date from 16th to 31st

  6. Aamod Dixit says:

    Ma’am
    Can you please confirm whether the Maharashtra State Electricity Bills can be claimed under LTA LTC scheme? The 16% tax on electricity ..is it a GST? The bill does have GSTIN of Mahavitaran.

  7. Manish Vyas says:

    I want to purchase a car in April 2021. Will it be applicabel for next year also?
    If i purchase car for my wife , i will get the benefits

  8. prashant sapkale says:

    Dear Madam,

    I Am writing this email to you regarding the concern for not being able to avail the LTC cash voucher scheme 2020. I am currently working in the central PSU under petroleum ministry in New Delhi. The company has not so far made available the provision for availing the benefit in line with LTC cash voucher scheme 2020 in their LFA ( Leave fare Assistance) which is in lieu of LTC in PSU.

    The reasons are not known and my concern is that if we are not in position to avail the benefit of the said scheme before 31st March 2021from the employer, Iam therefore asking advice that can i be able to receive reimbursement from tax authorities for the same and can be claimed in ITR.

    If I’m withdrawing the LFA amount as an encashment from the company , then they will simply deduct the TDS, so whether the TAX deducted can be further reimbursement for Income tax authority after filing the ITR, subject to buying a GOODS with approx RS 4 Lakhs before 31 st Mar 2021.

    Please help me for the above matter and revert the undersigned ASAP. Thank you in advance.

  9. Sushil Kumar says:

    Pl. clarify if Credit Card Interest paid during this period is eligible for income tax exemption. 18% GST is levied onto it.

  10. R.Jebaraj says:

    My LTA was received in June 2020. I have purchased things in Dec-20 and Jan-21.
    Hope i can still claim the benefit of the purchase

  11. BIRENDRA NATH MALLICK says:

    While purchasing items, because of limit being exhausted in my credit card, I paid part amount with my son’s credit card. All the bills are in my name and the bill says PAID IN FULL. My son is earning and hence no more my dependent.
    My office says that as the part payment was made by my son, I cannot claim the money under LTC Cash Voucher scheme.
    I returned the amount (that my son had spent) to his account. I submitted bank receipts that I have returned the amount (as if borrowed from him for the purchases) to my son and submitted bank statement showing the amount has been deposited to my son’s account.
    My administration did not relent.
    Any clarification please; I shall be grateful.

  12. Mahesh says:

    Hello, I am working with a private sector. My salary is made of 2 component i.e Basic & others. LTA is one of the component of other benefits. For this FY I had declared that I will not be travelling & hence not claiming tax free LTA amount. Therefore my company has been paying the LTA amount in equal measures every month since April2020. Now my question – Can I avail the LTC benefit against my entire LTA allowance through my employer before 31 march or if the employer does not encourage this can I claim this as a refund when I file my returns.
    Nice article & thanks in advance

  13. Gagandeep says:

    The Period for Purchase of goods for claiming under LTC cash voucher Scheme has been kept till 31st March. My Employer has already closed the window for declaring the LTC on 18th Feb. How can I claim if I make purchases now before 31 March 2021? The govt must allow for LTC cash voucher claim while filing IT return.

  14. Nirjhar Jain says:

    I have not claimed LTA in the current bracket. Can I claim LTC for the period of 12th March 2020-31st March 2021. And then for the period of 1st April 2021 – 31st December 2021, Can I claim LTA again.
    Will it be considered as 2 claims in a single year and will not be allowed?

  15. Shyam says:

    I have recently taken Tata AIA life insurance policy whose quarterly premimum is Rs. 36094/ paid in 19th Dec’20 and now due in March’20. Can I avail the benefit of LTC cash scheme for this new purchased policy

  16. Chirag Bogra says:

    Can one claim LTA Cash Voucher Scheme for purchase of under construction property for which 12% GST is applicable & is paid using digital modes during the applicable period of Oct12 to March31. The question is specific to private sector employee.

  17. Nisha says:

    For the purchase of 4 wheeler(having GST 28%), whether full payment of is necessary for claiming LTC exemption? If I’ve purchased the vehicle in January 2021 with down-payment of approx 17% of tax invoice, rest of the amount through loan, Can i claim for LTC exemption in my company wherein purchase of 4 wheeler is allowed for LTC claim.

  18. sunil says:

    If vehicle (GST 28%) bought in EMI’s and only 15% upfront payment made by Employee. How much amount is eligible for calculation of LTA exemption. 15% – the payment made by Employee, or
    100% of the invoice value

  19. SANJAY KUMAR SINGH says:

    I have following Quarry pertaining to LTA claim policy for Private sector employees.

    1. Is the purchase of new Insurance eligible under Good and Services for LTA tax exemption?
    2. Why Renewal of Insurance not eligible for LTA tax exemption?
    3. From where I can get the Government circular where it mention that which Goods and Services eligible for LTA tax exemption.
    4. Recently I travelled in India by Air alone. Can I produce this ticket for LTA tax exemption under this new policy?
    5. My company has FBP scheme can I produce same bills for availing tax exemption under LTA?
    6. I have taken membership in professional Institution like Institution of Engineers. Will the membership fees is eligible?
    7. The lockdown period was from 22nd March 21 but the Govt has made the scheme applicable from 12th Oct 21. Most of Goods and Services purchase through online was done during the lockdown period.
    8. Will the School fees paid through Cheque eligible. Not claiming under section 80C

  20. himanshu says:

    my employer provides half basic every year(jan-dec) for LTA. i have taken lta half basic amount in jan 2020 on which i have paid income tax.
    now i have taken lta in jan 2021 i.e half month basic for block year 18-21. can i take benefit of this scheme as earlier received lta amount was taxable

  21. Hemantha says:

    1) In my salary slip, it’s showing Rs. 15K per month as LTA component.

    I’ve a wife, child and both parents as my dependents. Now how I can calculate the deemed LTC to be spent.

    2) Currently, the last date for submitting LTC proof is 18th Feb but I don’t think I can make it.

    So, can I claim this during Income tax filling?

    Thanks

  22. Hemantha says:

    1) In my salary slip, it’s showing Rs. 15403 as LTA component.

    I’ve a wife, child and both parents as my dependents. Now how I can calculate the deemed LTC to be spent.

    2) Currently, the last date for submitting LTC proof is 18th Feb but I don’t think I can make it.

    So, can I claim this during Income tax filling?

    Thanks

  23. Hemantha says:

    Hi,

    I purchased 2nd hand car on 7th Nov and the car was originally registered on 21-Aug-2020.

    I paid 1st car owner thru bank transfer and also I paid road tax but by the cash.

    In this case, I cannot claim LTC as original Invoice is with 1st car owner’s name and I paid life time road tax (14.33%) but road tax doesn’t come under GST.

    Is my understanding correct?

    Thanks

  24. Ranu Jain says:

    I want to purchase a car (GST 28%), will this will be considered under LTC cash voucher exemption?

    Second, in my organisation, tax proof submission window is closed and my car will be delivered on 20th Mar.21. My tax on LTA will be deducted, in this case shall I claim the exemption while filing my return for AY 2021-2022 (FY – 2020-21).

    Will be grateful, if you please clarify.
    Best Regards

  25. Dheeraj says:

    My employer doesn’t allow me to declare LTA now for FY21 (should be done in Apr’20) and hence I cannot submit the bills for FY21 (Oct-Mar21). Is it possible I can make LTA declaration in Apr’21 and submit these bills in next year. I haven’t availed LTA in any of the last 4yrs.

  26. Raju says:

    Hi,
    My eligible LTA for annum is 35,000. My family is of 4 members i.e., (36000 * 4 = 1,44,000) and Amount spend needed is (1,44,000 * 3 = 4,32,000), Where as I have bills for Inverter, Refrigerator and others @ 18% is around 1,00,000/-. Now that I am entitled to get Tax benefit = (1,44,000 * 1,00,000 / 4,32,000) = 33,334 INR. Is the calculation correct ?

  27. Atul says:

    Hi, I am working in private sector and LTA component is Rs. 36000/-per yr which is part of CTC. My family is of 3 members. what will be the maximum exemption I can avail under this Ltc cash voucher scheme?

  28. Vipin says:

    Can one claim LTA for the purchase of Equity stocks / Mutual Funds and Sovereign Gold Bonds through a authorized stock broker between Oct 12, 2020 – Mar 31, 2021?

  29. sowm says:

    Hello mam,

    We bought few goods during this period however the amount was paid from my spouse bank account.My company is asking for bank account statement for confirmation of purchase.So should the account and invoice should be same persons name inorder to avail benefit or dependant bank account numbers are fine?Pls clarify

  30. Vasanti says:

    Do we need to submit 36000*3 amount bills each in name of self and spouse separately? or can combine total amount(108000+108000) and produce single bill?

  31. Amit Ajay says:

    Hi ,
    I wanted to claim LTA for a travel made by me and family (kid + spouse) for a 3 week time period.
    Out of the 3 weeks , I was on leave for first two weeks and Working from home in the last week.
    Would I be able to claim LTA for both the sides of air travel.
    Thanks

  32. Vaibhav says:

    I am working in private company and have LTA component in ctc. My employer tax consultants are not considering 12% or above gst goods for claiming LTA, stating that there is no official statement from tax authorities and the statement were only press release. They also confirmed this from pwc

  33. Chetan says:

    Max LTA allowed as per CTC is 1,20,000

    Considering 36000/family member and family of
    including myself = Amount is 108,000

    I have to spent 3 * 108,000 = 324000 to get full exemption on Rs 1,08,000 as 12000 would be taxable

    So if in 20% bracket, then effective maximum savings would be 20% of 108000 = 21600.

    Please confirm

  34. Debayan Pal says:

    I have changed my employer in the November Month. I have not claimed my LTC benefit from my previous employer. I have a purchase bill with a GST of more than 12% dated 20th October. So, can I claim LTC for the same bill from my new employer? If the answer is yes, then will my eligibility will be considered based on the new employer’s LTA amount or both (previous + current) employer’s LTA amount?
    Please, reply

  35. Esha says:

    Hi Anita,

    I have bought a flat and paid 12% GST. What kind of GST invoice is needed to claim LTC? and could you help with the list of documents required other than that?

  36. Nitin says:

    A very nice Article Anita ji, very informative and insightful. One query, if I have family member of 4 then total eligible amount is 1,44,000 and purchase amount should be 432,000. Is this purchase of 432,000 can be in name of 1 person or should be divided equally?

  37. Puneet Singal says:

    Very informative article, Anita ji. One question. If in an invoice, taxable value is Rs. 10,000 on which GST@18% = Rs. 1,800 is charged making the bill total Rs. 11,800.
    Then for the purpose of calculating the eligible amount, whether Rs. 10,000 is considered or Rs. 11,800?

  38. Murthy Sriram says:

    On Mobile purchase statement, CGST is mentioned as 9% and SGST is mentioned as 9%. Can it be considered as 18% GST and applicable for LTC?

  39. bala says:

    I want to buy four wheeler to the value of around seven lakhs and cash will be paid for three lakhs and remaining through EMI. Can i avail the exemption in LTA for the cash paid?

  40. Shireesh says:

    This is confusing , what if someone does not want to make any purchase or travel. what tax one has to pay to get the accumulation against the block.

  41. anil says:

    In context of Private employees, to avail the benefit , can we buy goods in name of spouse and what is maximum limit , is it for 4 persons only or 6 persons including dependent parents. i. e 36000* 6 or 36000*4.

  42. Anil says:

    To avail the benefit , can we buy goods in name of spouse and what is maximum limit , is it for 4 persons only or 6 persons including dependent parents. i. e 36000* 6 or 36000*4.

  43. Sagar N says:

    Hello Madam, This is very insightful article. One query if pvt sector LTA eligibility per salary stack is less than deemed LTC for family, does the employee still eligible for full deemed LTC exemption if expenses done are 3 times deemed LTC limit with 12% GST and between 12 oct 2020 and 31 mar 2021

  44. Sam says:

    Very useful article, Mam. Thanks for clarifying many things. Any list of name of Policies (LIC/Private) that can be availed with single payment mode to get full benefit of the scheme….any links to that list will be highly beneficial to Private sector employees. Thx

  45. Prashant says:

    Hi,
    Can I avail the cash voucher LTC against International Travel booking given it attracts more 12% GST.
    If, yes then can this be valid for booking made in this FY for travel in next FY. eg. booking done in Jan for travel in Apr

    Regards,
    Prashant

  46. Dipankar says:

    Can the purchases of electronics gadgets like mobile, TV from online (Flipkart/Amazon) be also considered? Can I submit those bills to show purchase?

    And also if I have actually traveled and have invoices can that also be claimed?
    Please advise..

  47. mukkesh says:

    Hi,
    Can normal Mobile and telephone bills be claimed under the scheme? In case of prepaid, there is a recharge done so only receipt generated, since GST applicable on Telecom is 18% can the recharges done be claimed?

  48. Raja says:

    If Private company find difficult to implement this new LTA announcement because of very less time now.

    In that case an individual can file the same in ITR and can get the benefit amount returned from income tax department or not.

    Could you please answer this

  49. Jagdish Pandya says:

    Dear Madam,
    I had purchase four wheeler in Oct.20. Though dealer invoice date is 11.10. 2020 but RTO temporary registration date is 13.10.2020, Whether I can claim this invoice for LTC claim for FY 2020-21.
    Please reply.

  50. Gurpreet singh says:

    Sir/Mam I have availed 2020 LTC for hometown. Can I avail this scheme(LTC special cash package) against my 2021 LTC using bills from 12 oct 2020 to 31 march 2021. Please clarify

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