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I-T exemption under LTC cash voucher scheme: All you need to know

The Income Tax Department has extended the I-T exemption available under the LTC cash voucher scheme to employees of state governments, state-owned enterprises and private sector

Topics
LTC | Income tax | I-T exemption application

PTI & BS Web Team  |  New Delhi 

Cash Allowance

Cash Allowance
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Payment of cash allowance, subject to maximum of Rs 36,000 per person as deemed Leave Travel Concession (LTC) fare per person (Round Trip) to non-central government employees, shall be allowed income-exemption subject to fulfilment of conditions. "In order to provide the benefits to other employees (i.e. non-central government employees) ... it has been decided to provide similar income-exemption for the payment of cash equivalent of fare to the non-Central Government employees also," the CBDT said. Non-central government employees include employees of state governments, public sector enterprises, banks and private sector.

Conditions

Conditions
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The conditions listed out by the CBDT for availing the exemption under the cash voucher scheme require the employee to spend a sum equal to three times of the value of the deemed fare on purchase of goods / services which carry a GST rate of 12 per cent or more from GST registered vendors / service providers through digital mode between October 12, 2020 to March 31, 2021 and obtains a voucher indicating the GST number and the amount of GST paid.

 

The Process

The Process
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The employees have to exercise an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21. Also an employee who spends less than three times of the deemed LTC fare under the cash voucher scheme 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.

Reasons

Reasons
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In view of the Covid-19 pandemic and resultant nationwide lockdown as well as disruption of transport and hospitality sector, as also the need for observing social distancing, a number of employees are not able to avail of LTC in the current Block of 2018-21. With a view to compensate central government employees and incentivise consumption, thereby giving a boost to consumption expenditure, the government had on October 12 allowed payment of cash allowance equivalent to LTC fare to Central Government employees subject to fulfilment of certain conditions.

Who will not get the exemption?

Who will not get the exemption?
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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 under concessional tax regime shall not be entitled for this exemption.

The Calculation

The Calculation
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If the deemed LTC Fare is Rs 80,000 (Rs 20,000 x 4), then the amount to be spent under the scheme is Rs 2,40,000. Thus, if an employee spends Rs 2,40,000 or above on specified expenditure, he 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 per cent (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 per cent of the required amount.


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First Published: Fri, October 30 2020. 12:09 IST
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