- CA Anita Bhadra
- | Income Tax - Articles
- 31 Dec 2020
- 19,803 Views
- 29 comments
1. 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.
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 [email protected]
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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?
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.
Full amount of LTA received will b taxable in such case
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.
No. of persons depends on your LTC eligibility.
Dependent parents are eligible. Hence you can claim for 6 persons
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.
Can I buy goods in name of spouse to claim this benefit. Is the benefit restricted to 4 persons only or including parents, it can be 36K *6
Yes
You can purchase goods in the name of spouse
Available for all the dependents as per LTC rule under Income Tax Act
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
Thanks for your humble comments
Rs. 36000/- is the maximum deemed fare. The exemption cannot be claimed for more than the entitled amount of LTA.
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
Thanks for your humble comment.
Purchase of new LIC policy covered under the scheme. No specifications have been mentioned about the type of policy.
However, renewal premium is not eligible for the purpose
Hi,
Can i purchase gold and claim LTC??
Hi, Can i purchase gold and claim LTC??
The rate of GST shall be more than 12% and the GST rate is 3% on Gold.
So you can purchase gold under the scheme
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
LTC against travel in India only is permissible. Not permissible for international travel
Can I claim payments for demand letter raised by builder to construct my flat.
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..
Yes
You can avail of the benefit on purchase of these items and the actual travel – subject to GST Rate not less than 12% and payment through digital mode
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?
The receipt shall be indicating GST charged @ 12% or more
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
Yes
Private company and non-central government companies are waiting for the notification
or amendment in the Income Tax Act.
The employees have no option but to avail themselves of the benefit at the time of filing their return.
In my view, there should not be any problem
Have a any concession of income tax for leave encashment for special cash package scheme as per govt. scheme on 12-12-2020
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.
Invoice date is to be considered for the purpose
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
In my view – No
U have already availed benefit in 2020 and can’t avail again benefit in lieu of LTC in 2021
To my understanding one can avail LTC hometown once in 2 year , All over India once in 2 year ( out of 4 years block period)