The Covid-19 pandemic has brought an unprecedented attack on our economy. While it has taken a significant hit on people’s livelihood, it has also affected some of the Government’s allowances. One such allowance that has been notably impacted by the pandemic is the Leave Travel Allowance or Concession (LTA/ LTC).

Due to the nationwide lockdown and various government restrictions, people’s travel plans got disrupted. None of them could utilize the LTA available along with their salary components. However, to address the present economic situation and motivate the employees to use their LTA’s, the Government has introduced the LTC Cash Voucher Scheme. This would help the employees to get cash payments after they fulfill the conditions set by the Government. Read on to see how this newly devised scheme can help the employees working in the private sector.

What is LTC Cash Voucher Scheme?

As per the Income Tax Laws, 1961, two round trips in a period of four calendar years are available for a tax deduction as Leave Travel Concession or Allowance. As the employees were completely unable to utilize this provision this year, which falls from 2018 to 2021, the Government has considered this aspect and decided to introduce a Leave Travel Concession (LTC) Cash Allowance scheme, both for Central Government and the private sector employees

With the help of this scheme, the employees will be provided with a cash allowance equivalent to the LTA deemed by the Central Government or the employer in the private sector.

The LTC Cash Voucher Scheme has been tactfully devised to boost consumer demands and help employers balance the implications of taxation. According to this scheme, even if an employee doesn’t travel, he can avail of the tax benefits under LTC, provided certain conditions are fulfilled.

Ways in which Private-Sector Employees can use the LTC Cash Voucher Scheme

To avail of the benefits under this scheme, an employee needs to fulfill the following conditions:

  • An employee has to spend three times the deemed LTA amount on purchasing any service or goods. Moreover, the purchase needs to attract a GST of 12% or more.
  • This amount needs to be spent from the 12th of October, 2020, to the 31st of March, 2021.
  • This purchase’s payment needs to be made via a digital mode, including debit/ credit payment, online banking, cheques, etc.
  • Employees need to furnish the invoice or its copy to the employer. Note that the invoice furnished should exhibit the store’s GST number and the GST amount paid. Moreover, it is advised that the employees submit a self-attested copy of the invoice to keep the original copy for future use.

If the employees fulfill the LTC’s conditions, the deemed LTA amount set in their salary structure will be tax-exempt.

Note The purchase invoices that need to be submitted before the employer can also be in any of your family member’s names. 

Tax Exemption under the LTC Cash Voucher Scheme

The LTC scheme was first devised for the Central Government employees; it was then extended to benefit the private sector employees. Now, as per the guidelines, a private sector employee can receive a maximum benefit of Rs. 36,000.

However, when it comes to adopting the LTC Cash Voucher Scheme by corporate employers, the entire process lacks transparency. In most cases, the private employees are provided with an LTA scheme for travel purposes as a component of their salary structure and now, how the current form of the LTC scheme will be adopted seems a confusing affair. 

Moreover, none of the FAQs that address the queries regarding the LTC Cash Voucher Scheme sheds adequate light on implementation aspects. For instance, if the amount that remains unclaimed from the LTC benefits gets carry forwarded to the next year is not clear and needs to be clarified by the Government.

The employees are waiting for the Government to accelerate the amendment process and ensure proper clarity on how the LTC scheme can be put into function by the private employers. However, the employees are hopeful that the organizations and companies will soon gain clarity on the implementation aspects. They can avail the tax benefits as per the newly released LTC scheme. 

Important note: The LTC Cash Voucher Scheme will not be available for the employees who have opted for the new concessional personal tax plan.

Key Takeaway

The LTC Cash Voucher Scheme has been a welcome initiative. It will help meet dual purposes – creating a demand in the economy and helping the employees utilize the existing LTA exemption. Now, it is up to the employers and the employees to sort a plan so that this scheme can be put into benefit during tax filing