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Is LTC Cash Voucher Scheme Beneficial for Private Sector Employees

is-ltc-cash-voucher-scheme-beneficial-for-private-sector-employees

While announcing LTC Cash Voucher Scheme on 12th October 2020, the Finance Minister said, “The biggest incentive for employees to avail the LTC Cash Voucher Scheme is that in a four-year block ending in 2021, the LTC not availed will lapse, instead, this will encourage employees to avail of this facility to buy goods which can help their families.

    What is the LTA/LTC cash voucher scheme?


    The LTC cash voucher scheme is introduced by the government in order to boost consumption in lieu of actual travel.


    Readers are aware that income-tax exemption on LTA paid to employees including private-sector employees is available only if the employee actually travels in India and produces the corresponding documentary proof of travel. In case an employee does not travel in India then he cannot claim any income tax exemption from the LTA even if his employer has paid the LTA to him. In this case, LTA received from the employer will be fully taxable since this LTA is received without actual travel.



    However, in this pandemic travelling has become riskier, and hence the benefit of the income-tax exemption on LTA is extended to employees without travelling. 


    The tax exemption from LTA without actual travel by employees is given with certain conditions and if the employees fulfil certain criteria. These conditions and criteria are specified in a scheme called LTC Cash Voucher Scheme.


    In this scheme, all the employees are eligible to receive an equivalent amount of their eligible LTC/LTA fare as a cash payout for spending such amount on purchase of specified goods and services to make such LTA exempt from tax.


    Here is how the scheme works.


    Let us assume that an employee is entitled to LTA of Rs. 20,000 for the current year.  Normally, he has to produce tickets to claim it tax-free, otherwise, he has to pay tax on this income. If his tax bracket is at 20%, he has to pay tax of Rs. 4,000 on his LTA income of Rs. 20,000.


    Government is now offering an option where the employee can avoid paying the tax of Rs. 4,000 without going to any vacation in the current year provided he satisfies the conditions specified in this scheme.


    Who can avail LTA/LTC Cash Voucher Scheme?


    Initially, when the LTC Cash Voucher Scheme was announced on 12th October 2020 by the Finance Minister, the benefit of tax exemption from LTC without actual travel was given to Central Government Employees only. Although it was then stated that this benefit will also be extended for other employees including private-sector employees.


    On 29th October 2020, the Income Tax department has announced that the benefit of income tax exemption form LTC Cash Voucher Scheme will be allowed to all employees, including workers in the central government, state government, state-owned organisations, and the private sector.



    Therefore, every employee who receives LTA from his employer is eligible for tax exemption from LTA without actual travel if certain conditions are satisfied. This discussion is confined to the receipt of LTA and tax exemption thereon to the private sector employees only.


    Conditions for Tax Exemption from LTA/LTC under LTC cash Voucher Scheme


    In general, in the case of private-sector, the LTA payable to an employee is included in his CTC (Cost to Company). The employee is entitled to LTA as per his entitlement and limit as set out and included in his remuneration. This limit so set out covers for self and family travel.


    Many organisations allow LTA to the employee concerned even if no travel is undertaken by the employee and in this case, the entire amount of LTA becomes taxable.


    For example, Mr. Rakesh is employed in a private company. His annual LTA entitlement is Rs. 20,000. During the year FY 2019-20, he and his family comprising his wife and two children travelled and incurred a fare cost of Rs. 25,000 for the entire family. He will receive Rs. 20,000 from his employer as LTA from his employer.


    LTA Exemption and Block of Year


    As per Rule 2B of the Income Tax Rules, 1962, exemption from LTA is available under section 10(5) in respect of two journeys performed in a block of four calendar years. The LTC Cash Voucher Scheme is for the LTC block of 2018-2021.


    Hence, if an employee of a private sector has already availed two exemptions then he is not eligible to claim an exemption under this scheme. In case an employee has availed one or not availed any exemption in the LTC Block period of 2018-2021, he is eligible to avail exemption from receipt of LTA from his employer in lieu of actual travel if he satisfies the conditions of this scheme.


    For example, Mr. Rakesh has claimed exemption from LTA for his journey performed in 2018 but not claimed any exemption u/s 10(5) thereafter. As he has not availed two exemptions for LTA u/s 10(5) for the LTC Block Period of 2018-2021, he will be eligible to claim an exemption under this scheme provided he satisfies the conditions. Any unutilized exemption for the LTC block period of 2018-2021 is eligible for this scheme.


    FAQ No. 2 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that "this scheme is applicable to the LTC fare left unutilized during the Block Year as mentioned in the O.M. dated 12.10.2020."


    The scheme covers and allows an income-tax exemption for the payment of cash equivalent of LTC fare to the employees. There is a ceiling of Rs. 36,000 per person for the payment of such cash allowance. Under this scheme, a maximum of Rs 36,000 per person is deemed to be the LTC fare per person (Round Trip) to non-Central Government employees/private-sector employees.


    Note: Readers are aware that tax exemption on LTA can be claimed on two journeys in a block of four years. The current block is 2018-2021 and is measured in calendar year terms not in financial year basis. An employee can carry forward one out of the two journeys in the next LTA block period. In such a case, the employee has to travel in the first year of the next LTA block period.

     

    If an employee has not availed LTA tax exemption in the block period of 2018-2021 and does not wish to travel in 2020, then this scheme is a very attractive option for such an employee and will result in tax savings.

     

    However, if one journey is undertaken and LTA tax exemption is already claimed in the current LTA block period of 2018-2021, then the employee has the option to carry forward the unutilised or unclaimed LTA exemption in the first year of the next LTA block period of 2022-2025. In this case the journey must be undertaken in the year 2022. If the journey is undertaken from January 2022 to March 2022, then the LTA exemption will be allowed in the FY 2021-22. If the journey is undertaken from April 2022 to December 2022, then the LTA exemption can be claimed in the FY 2022-23. The tax exemption will be available in the financial year depending on the month in which the travel is undertaken.


    Deemed LTC Fare under LTC Cash Voucher Scheme


    In simple terms, for an employee of a private sector, the amount of deemed LTC fare is his entitled amount of LTA as per his CTC. In the example of Mr. Rakesh given above, it is Rs. 20,000.


    In Mr. Rakesh’s case, deemed LTC fare is calculated as below-


    Number of family members of Mr. Rakesh

    4 (Himself, his wife and two children)

    His LTA entitlement for the entire family of 4 members for round-trip travel

    Rs. 20,000 (as per his CTC)

    Maximum deemed LTC fare

    =Rs. 36,000 per person

    =Rs. 36,000 x 4 = Rs. 1,44,000

    Deemed LTC fare, whichever is lower for the purpose of this LTC Cash Voucher Scheme

    Rs. 20,000 or Rs. 1,44,000, whichever is lower

    =Rs. 20,000

    Hence, the deemed LTC fare for Mr. Rakesh under this scheme is Rs. 20,000.


    Amount to be spent under LTC Cash Voucher Scheme for availing LTA exemption


    The Scheme requires in order to avail tax exemption on LTA without actual travel, the employee has to spend at least 3 times of the amount equal to deemed LTC fare, as determined above.


    In the case of Mr. Rakesh, the deemed LTC fare is Rs. 20,000. So he needs to spend 3 times of Rs. 20,000 or Rs. 60,000 to avail tax exemption of Rs. 20,000 received towards LTA without travel.


    Deemed LTC Fare

    Rs. 20,000

    Amount to be Spent

    =Rs. 20,000 x 3

    =Rs. 60,000


    Whether the Amount of Purchase is inclusive of GST amount


    As stated in the above example, the employee has to spend Rs. 60,000 for availing LTA tax exemption of Rs. 20,000. Further, as per the requirement of the Scheme, the amount needs to be spent on the purchase of goods and services having at lease GST rate of 12%. Therefore, if a person is required to spend the amount of GST in addition to the stipulated amount then it would amount to higher spending without any attached tax benefit. For example, if it is interpreted that the employee has to pay Rs. 60,000 plus GST then actually he is spending Rs. 67,200 (assuming GST rate of 12%) which is higher than the amount that needs to be spent under this scheme. Further, if the item attracts a GST rate of 28% then the amount comes to Rs. 76,800 including GST of Rs. 16,800. This leads to an illogical interpretation. Further, there may be many items of different GST rates. Hence, it is improper to interpret that the amount of spending should be excluding the GST amount.


    The scheme actually requires spending three times of deemed LTC fare and since the purchase of goods or services from a GST trader is a prerequisite condition, the amount of spending shall be inclusive of GST. Further, for an employee, there is no benefit of GST input credit being the consumer. Hence, this will lead to tax exemption in the spirit of the Scheme. However, to avoid any ambiguity on the issue, it is better if the government clarifies it.


    Where to Spend the amount under LTC Cash Voucher Scheme


    Under this scheme, the employee has to spend the three times of deemed LTC fare on purchase of any goods and services from a GST registered traders/vendors and such goods and services must carry a GST rate of at least 12%.


    In other words, in the case of Mr. Rakesh, he should spend Rs. 60,000 for purchase of any goods or services which carries a GST rate of 12% or 18% or 28%. If the goods or services carry the GST rate of less than 12%, such purchases will not be considered under this scheme.


    For example, clothes and textiles attract a GST rate of 5% hence purchase of shirts, trousers, sarees will not be considered under this scheme. However, mobile phones carry a GST rate of 18%, hence, purchase of the same is eligible under this scheme.


    Items on which expenditure would qualify for LTC Cash Voucher Scheme


    This scheme provides for LTA tax exemption in case the amount is spent on purchase of any goods or services. The only condition is that the rate of GST on such goods or services must be at least 12% and the payment for such purchases must be made in digital mode.


    There is no bar or specific inclusion/exclusion of goods or services. All the items we purchase in day to day life like grocery items, medicines, etc. are also covered in this scheme. It is not limited to white goods or brown goods. This scheme covers all types of goods and services attracting a GST rate of at least 12%. Some of the goods are anyway purchased by people due to necessity.


    List of goods and services under the LTC Cash Voucher Scheme: Since the scheme covers all the goods and services it is not possible to provide a list of items qualify for this scheme. However, a tentative list of certain popular items are given below for guidance purposes-


    Goods and Services

    Tentative rate of GST

    Eligible Goods and Services

    Mobile Phones, Laptop, Mobile accessories

    18%

    Medicines, Face masks other than cotton

    12%

    Cameras,  ACs and Refrigerators

    28%

    Dettol Antiseptic Liquid, Sanitizer, 

    18%

    Interior Services

    18%

    Ineligible Goods and Services

    Shirts, Trousers, Sarees, other garments

    5%

    Textbooks

    0%

    Vegetables and foodgrains, etc

    0%

    Diesel, petrol, etc.

    Non-GST products

    Gold and jewellery

    3%


    FAQ No. 9 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that “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.” Further, FAQ No. 13 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that “any service which is having a GST component of more than 12% is permissible.” The FAQ 13 was related to services like interior decoration and phone bills.


    Payment of Insurance Premium: This scheme allows payment for purchase of any goods or services having GST rate of at least 12%. The goods/services also include insurance premium. However, it is clarified that 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.


    Mode of payment for the purchases made under LTC Cash Voucher Scheme


    In order to claim tax exemption from LTA without actual travel under this Scheme, the employee has to make the payment for the purchase the goods and services from GST vendors in digital mode only.


    What constitutes digital mode of payment is not stated in the Scheme but as per Rule 6ABBA of Income Tax Rules, 1962, which specifies ‘other electronic modes of payments to include credit card, debit card, net banking, IMPS (Immediate Payment Service), UPI (Unified Payment Interface), RTGS (Real Time Gross Settlement), NEFT (National Electronic Funds Transfer), and BHIM (Bharat Interface for Money) Aadhaar Pay. Further, payment by account payee cheques is also specified in section 40A(3).


    FAQ No. 10 of O.M. dated 10.11.2020 on LTC Cash Voucher Scheme clarifies that payment can be made by cheque /DD / Banker's Cheque/ NEFT/RTGS.


    Whether payments from Wallets are covered: The scheme has specified that the payment must be made in digital mode. What is covered under ‘digital’ mode of payment is neither specified in the scheme nor it is covered in the Income Tax Act. The Income Tax Act defines and covers ‘electronic modes’ of payments which does not list ‘wallet’ payments.


    The purpose of specifying digital mode of payments is to discourage cash transactions and to prevent the misuse of the scheme. In the absence of any clarification in this regard and considering the objective, one can conclude that payments from wallets like paytm, freecharge, etc. is also covered under this scheme. However, it is not beyond any doubt. Hence, a clarification on the issue from the government is highly solicited.


    In whose name the card/net banking should be held: Normally a person pays from his own bank account whether payment is made by debit/credit card. Net banking, cheques, etc. There are certain situations where a person uses the card etc. of another person and then repays to the friend. Take a situation where an employee does not have a credit card and there is a good offer going on an e-commerce site. So he uses the credit card of his friend for purchasing the product. In this case, the payment is made in digital mode but the credit card is not owned by the employee. Will this payment be considered as eligible purchases for LTA tax exemption under this scheme.


    The objective of the scheme is to promote digital payment for the purchases. Hence it can be said that if the employee repays the friend in digital mode say by cheque or net banking, it should be considered as sufficient compliance of the conditions of the scheme since there is no cash involved. This also allows trail of the transaction since the entire payment chain is in digital mode. However, if order to avoid any ambiguity,the government should clarify this position.


    In this context, reference may be drawn to the FAQ No. 6 of O.M. dated 10.11.2020 on LTC Cash Voucher Scheme which clarifies that purchases on EMI basis/Loan are also permissible. The FAQ No. 6 is reproduced below for ready reference-


    Query 6: Whether purchase goods/services on loan/EMI, will be covered under this scheme?


    Reply: Purchase of any goods or services which attract GST of 12% and above qualify for reimbursement under this scheme. Purchases on EMI basis are also permissible. The purchase should have been effected after the issue of the order i.e. 12.10.2020 and should have an invoice.


    In case the account/card of family members of the employee is used for making the digital payment, there is undoubtedly no confusion in allowing the LTA exemption for the eligible purchases under this scheme.


    Note: The reply to the query mentioned in the FAQ No. 12 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme relates to the cardholder being the employee's family member. Instead of replying to the query on the card, the reply was given in the context of invoice. It was clarified that the invoice which is being submitted for reimbursement under the scheme should be in the name of the employee who is availing the scheme. However,  by the OM dated 04.11.2020, it was further clarified that the invoices of the goods and services purchased as per the scheme may be in the name of spouse or any family member who are eligible for LTC Fare. Going by the same principles, the card can be in the name of the employee or may be in the name of spouse or any family member who are eligible for LTC Fare.


    One time purchase or multiple purchases: The spending requirements under this scheme is not required to be made in one transaction. It is clarified that the purchases can be made in multiple transactions. Thus multiple items can be purchased in one tax invoice or in multiple tax invoices. The aggregate of such purchases for the period between 12th Oct 2020 to 31st March 2021 shall be considered for LTA exemption under this scheme.


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    FAQ No. 7 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that "Multiple Bills are accepted. The purchase should have been done from the date of issue of the O.M. till the end of the current Financial Year. The purchase should carry a GST of 12% and above and payment should have been made to digital mode." Further, FAQ No. 17 of O.M. dated 10.11.2020 on LTC Cash Voucher Scheme clarifies that an individual can purchase different items under this scheme like washing machine, mobile, AC, etc. which attract a GST of 12% and more.


    Limit on Number of transactions: There is no limit on number of transactions undertaken under this scheme. However, it is advised to keep the number of transactions in a limited number to avoid any difficulty/delay. FAQ No. 14 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that “as far as possible, the number of transactions may be limited to a minimum extent to avoid any difficulty/delay.


    In whose name tax invoices should be made: The tax invoices for the eligible purchases shall be in the name of the employee or any family members of the employee. It is clarified vide an OM dated 04.11.2020 that “the invoices of the goods and services purchased as per the scheme may be in the name of spouse or any family member who are eligible for LTC Fare.


    Proportionate exemption under LTC Cash Voucher Scheme


    In order to claim full exemption from the LTA received from the employer under this scheme, an employee has to spend at least 3 (three) times of the deemed LTC fare on specified expenditure during the specified period from 12-10-2020 to 31-03-2021.


    Thus, in case an employee spends full 3 times of the deemed LTC fare then he will get 100% exemption from the LTA. In case an employee fails to spend 100% of 3 times of his/her deemed LTC fare, then the Scheme allows for proportionate exemption from the LTA.


    Employees who have spent less than three times of their eligible deemed LTC fare, there will be a tax exemption, but, in this case, it will be lower than the total exemption amount that they are eligible to receive had they incurred full 3 times of their deemed LTC fare. The exemption, in this case, will be calculated proportionately based on what they spend in the specified period.


    For example, if Mr. Rakesh spends Rs. 60,000 from 12-10-2020 to 31-03-2021, then he shall be entitled to claim full exemption of Rs. 20,000 from the LTA he has received from his employer.


    If Mr. Rakesh fails to spend full Rs. 60,000 but actually spend Rs. 30,000, he shall be entitled to claim exemption of Rs. 10,000 only which is computed below-


    LTA Exemption = Rs. 30,000/Rs. 60,000*Rs. 20,000 = Rs. 10,000.


    In case he spends Rs. 20,000 only then the proportionate LTA exemption shall be computed as below-


    LTA Exemption = Rs. 20,000/Rs. 60,000*Rs. 20,000 = Rs. 6,667.


    Remaining Rs. 13,333 of the LTA amount received from the employer will be taxable.


    An example of proportionate tax exemption from LTA is also given by the income tax department which is reproduced below-


    For employees who have spent less than three times their eligible LTC fare, there will be a tax exemption, but it will be lower than the total exemption amount that they are eligible to receive. It will be calculated proportionately based on what they spend.


    Deemed LTC Fare

    Rs. 80,000

    Amount to be spent

    =Ra. 80,000 x 3 = Rs. 2,40,000

    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.

    If the employee spends Rs. 1,80,000 only

    He shall be entitled for 75% (i.e. Rs. 60,000) of deemed LTC fare and the related income-tax exemption.


    How the employer will allow exemption from LTA to the employee under LTC Cash Voucher Scheme


    The employer shall allow income-tax exemption subject to fulfilment of the aforesaid conditions by the employee. The employer shall obtain copies of invoices of specified expenditure incurred during the specified period. Thus, the employee should submit their tax invoices to their employer so that the exemption can be allowed to them.


    In case an employee cannot submit original bills due to warranty, etc.,  the employee can submit a self attested photocopy of the bill to the employer. It is not mandatory for him to submit the original bills in such a case. However, the employer has the right to verify the original bills. In this context, FAQ No. 5 of O.M. dated 25.11.2020 on LTC Cash Voucher Scheme is noteworthy which is reproduced here-


    Query 5: 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.


    Reply: No, self attested photocopy would suffice. However,  the original bills may  be produces on demand for information.


    New Concessional tax regime under section 115BAC: In case an employee wishes to opt for a new concessional tax regime under section 115BAC he shall not be entitled for this exemption since section 115BAC does not allow any tax exemption for LTC/LTA under section 10(5). It is further clarified that as this exemption is in lieu of the exemption provided for LTC fare, an employee who has exercised an option to pay income tax under concessional tax regime under section 115BAC of the Income-tax Act, 1961 shall not be entitled for this exemption.


    Prescribed format for applying for this scheme: In order to avail the benefits under this scheme, the employee simply needs to apply in plain paper for reimbursement to his employer. The government has not prescribed any format for applying for this scheme. FAQ No. 8 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that “there is no prescribed format. A simple application conveying the desire of the employee for availing the scheme, if advance is required for the purpose the same is to be mentioned.


    Partial tax exemption under LTC Cash Voucher Scheme and partial under actual travel


    In case an employee performs travel with LTC he cannot avail the benefit of tax exemption under LTC Cash Voucher Scheme. In that case, he has to claim the exemption under the actual travel rules.


    This scheme is introduced to claim tax exemption from LTA in lieu of actual travel due to the ongoing COVID-19 pandemic. Hence, the exemption under both the rules cannot be claimed.


    In case an employee undertakes travel but does not claim LTA exemption for travelling he can claim the exemption under this scheme. He has claim exemption under any one of the rules, but cannot under both the rules. Partial exemption from travelling and the partial exemption from spending/scheme is not allowed.


    For example, if Mr. Rakesh performs travel in 2020 and incurs expenditure of Rs. 6,000 only on fare. He has purchased eligible goods in the specified period for Rs. 30,000. His LTA entitlement is Rs. 20,000. He has the option to claim exemption under this cash voucher scheme. In such a case, he cannot claim exemption on actual travel. Conversely, if Mr. Rakesh claims exemption for actual travel, he cannot claim exemption under this scheme.


    In this case, the maximum exemption is available under LTC Cash Voucher Scheme so he should opt for claiming exemption under the scheme.


    Leave availment by employee for availing benefit under LTC Cash Voucher Scheme


    This scheme is introduced to allow tax exemption on LTA in lieu of actual travel by the employee. The employee needs to spend the amount on purchasing the specified goods and services in the specified period. Hence, it is not necessary to take any leave by the employee for availing this benefit. Hence, under this LTC Cash Voucher Scheme, an employee is eligible for claiming LTA tax exemption without actual travel and without taking any leave.


    FAQ No. 1 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that "an individual need not take leave for this purpose nor undertake any travel. This is a scheme in lieu of LTC travel." Further, FAQ No. 3 of O.M. dated 20.10.2020 on LTC Cash Voucher Scheme clarifies that "an employee can avail this scheme utilizing the applicable LTC fare without leave encashment.



    Legislative Amendments to LTC Cash Voucher Scheme


    Through a press release dated 12.10.2020 the Finance  Minister announced the introduction of the LTC cash Voucher Scheme for Central Government employees. An Office Memorandum providing the details of the scheme was issued on the same day. Later on, this scheme was extended to non-central government employees vide CBDT’s press release dated 29.10.2020. In the press release, it was stated that the legislative amendments shall be proposed in due course.


    The government has issued many clarifications and FAQs on the LTC Cash Voucher Scheme covering various aspects for implementing the scheme.


    However, the amendments to the income-tax law is awaited till date. Due to delay in notifying the amendments, many private sector companies have not implemented the scheme for more clarity.


    In this context, it should be noted that CBDT in its Circular No. 20/2020 dated 03.12.2020 issued for deduction of TDS under section 192 from salary income by the employer has clarified that the LTC fare is in lieu of deemed actual travel and hence the same shall be eligible for Income- tax exemption on the lines of existing Income-tax exemption available for LTC fare.


    In para 5.3.1 on page-25 of the Circular, the exemption under LTC Cash Voucher Scheme is clarified in the following words-


    Government of India allowed payment of cash allowance equivalent to LTC fare to central Government employees subject to fulfillment of certain conditions vide OM No. F.No. 12(2)/2020-Ell(A) dated 12th October, 2020. It has been provided that since the cash allowance of LTC fare is in lieu of deemed actual travel. the same shall be eligible for Income- tax exemption on the lines of existing Income-tax exemption available for LTC fare. Further in order to provide similar Income-tax exemptions to the non-Central Government employees, Government of India announced vide Press note dated 29.10.2020 that the payment of cash allowance, subject to maximum of Rs. 36,000 per person as Deemed LTC fare per person (Round Trip) to non-Central Government employees, shall also be allowed Income-tax exemption subject to the conditions laid down in the said Press note. Further, MI this exemption is in lieu of the exemption provided for LTC fare, in case of an employee who has exercised an option to pay Income-tax under concessional tax regime under section 115BAC of the Income-tax Act shall not be entitled for this exemption. It has also been mentioned that the DilOs shall allow Income-tux exemption subject to fulfillment of the specified conditions after obtaining copies of invoices of specified expenditure incurred during the specified period.


    Conclusion


    Those who wish to avail LTA tax exemption under this Scheme without actual travel would be benefitted from income tax exemption which can be construed as a discount on purchase of such goods and services. For example if the employee in the given example above spends Rs. 60,000 will get an exemption of Rs. 20,000 from his LTA income under section 10(5). If he falls in the tax bracket of 20%, he will save income tax on his LTA of Rs. 4,000 by spending Rs. 60,000. In this way his net purchases come to Rs. 54,000. This is a win-win situation for employees to claim tax exemption on LTA in lieu of actual travel in the current financial year.


    Many employees think that the spending requirement makes this scheme unviable for them but if one thinks wisely it can be seen that this is actually a beneficial scheme. All of us spend money on purchase of various goods like groceries, medicines, etc. Instead of buying in cash without receipt, one can put some extra effort to buy the same with a tax invoice and pay for the same in digital mode.


    This scheme allows proportionate exemption in case a person cannot spend full 3 times of his deemed LTA fare. This is one of the most attractive features of this scheme which many of us are not aware of. 


    The objective of this scheme is to boost the economy by increasing the consumer spending and the demand in the economy.


    One should carefully understand all the rules of this LTC Cash Voucher Scheme clearly before claiming the exemption for LTA. Alternatively, an employee has the option to carry forward the unutilised or unclaimed LTA exemption in the first year of the next LTA block period of 2022-2025. In this case the journey must be undertaken in the year 2022. If the journey is undertaken 


    Synopsis of LTC Cash Voucher Scheme



    Effective Date of the Scheme

    12.10.2020

    Period covered for spending

    12.10.2020 to 31.03.2021

    Spending on

    Any Goods and Services

    Rate of GST

    12%, 18% and 28%

    Payment mode

    Only Digital mode

    Amount to spend

    3 times of deemed LTC fare

    Tax Invoice

    In the name of the employee or his family members

    Allowability of exemption by the employer

    On the basis of tax invoices

    Limit on transactions

    No Limit. Multiple items allowed.



    LTC Cash Voucher Scheme Summary


    The features of LTC Cash Voucher Scheme as announced by the Government is outlined below-


    1. Tax exemption for private sector employees who are eligible to claim the leave travel allowance from their employer. Employees who have opted for the simplified tax regime will not be able to take the benefit of the exemption.


    2. To avail this tax benefit, the employee is required to spend three times the eligible amount on the purchase of goods or services which carry a GST rate of not less than 12% from GST registered vendors/service providers and the payments shall be made through digital mode only. Hence, payment in cash is not allowed under this scheme.


    3. The purchase of such goods/ services can be done through multiple bills and can be purchased from online/e-commerce platforms also.


    4. If an employee spends less than 3 times of the total value compared to deemed LTC fare, their income tax exemption would be reduced proportionately.


    CBDT explained that 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 the 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.


    5. The maximum deemed LTC fare is Rs. 36,000 per person under this scheme.


    6. The employee has to submit the invoices to the employer for claiming the exemption under this scheme. The invoices should be in the name of the employee or his family members.


    7. This is an optional scheme. An employee has to exercise this option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21. 


    8. The LTC Cash Voucher scheme is applicable for the period from 12-Oct-2020 to 31-Mar-2021.


    Text of Office Memorandum so far issued by the government and the clarifications in the form of FAQs on LTC Cash Voucher Scheme


    Sl. No.

    Particulars

    Issued on - Dated

    1

    Introduction of LTC Cash Voucher Scheme

    12.10.2020

    2

    FAQ-Series 1 on LTC Cash Voucher Scheme

    20.10.2020

    3

    Clarification on LTC Cash Voucher Scheme

    04.11.2020

    4

    FAQ-Series 2 on LTC Cash Voucher Scheme

    10.11.2020

    5

    FAQ-Series 3 on LTC Cash Voucher Scheme

    25.11.2020

    6

    CBDT Press Release extending LTC Cash Voucher Scheme to private sector employees

    29.10.2020



    1. Introduction of LTC Cash Voucher Scheme dated 12.10.2020


    F.No.12(2)/2020-EII(A)

    Ministry of Finance

    Department of Expenditure 

    EII(A) Branch 


    North Block, New Delhi 

    12th October, 2020


    Office Memorandum


    Sub: Special cash package equivalent in lieu of Leave Travel Concession Fare for Central Government Employees during the Block 2018-21.


    In view of 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 Central Government employees are not in a position to avail themselves of LTC for travel to any place in India or their Hometowns in the current Block of 2018-21.


    2. With a view to compensate and incentivise consumption by Central Government employees thereby giving a boost to consumption expenditure, it has been decided that 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 subject to the following conditions:-


    a) The employee spends the money of a larger sum than the entitlement on account of LTC on actual expenditure.


    b) 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.


    c) The deemed LTC fare for this purpose is given below:-


    Category of employees

    Deemed LTC fare per person 

    (Round Trip)

    Employees who are entitled to business class of airfare

    Rs. 36,000

    Employees who are entitled to economy class of airfare

    Rs. 20,000

    Employees who are entitled to Rail fare of any class

    Rs. 6,000


    d) The cash equivalent may be allowed if the employee spends a sum 3 times of the value of the fare given above.


    e) The amount both on account of leave encashment and fare shall be admissible if the employee spends (i) an amount equal to the value of leave encashment and; (ii) an amount 3 times of the cash equivalent of deemed fare, as given above on purchase of such items / availing of such services which carry a GST rate of not less than 12% from GST registered vendors / service providers through digital mode and obtains a voucher indicating the GST number and the amount of GST paid.


    f) The admissible payment shall be restricted to the full value of the package [leave encashment as admissible for LTC and deemed fare] or depending upon the spending as per example given at Annexure-A.


    g) While TDS is applicable in the case of leave encashment, since the cash reimbursement of LTC fare is in lieu of deemed actual travel, the same shall be allowed exemption on the lines of existing income-tax exemption available to LTC fare. The legislative amendment to the provisions of the Income-Tax Act, 1961 for this purpose shall be proposed in the due course. Hence, TDS shall not be required to be deducted on the reimbursement of deemed LTC fare.


    3. Head of the Departments / DDOs may make reimbursement under this package as per the details given above on receipt of invoices of purchases made / services availed during the period post the issuance of this order from the employees who are desirous to avail this package. It may be noted that in order to avail this package an employee should opt for both leave encashment and LTC fare.


    4. An amount upto 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 production of receipts towards purchase and availing of goods and services as given in Para 2(e). 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-utilisation and recovery of unutilized portion of the advance with penal interest.


    5. These orders will take effect from the date of issuance of this Office Memorandum and will be in force during the current financial year till 31st March, 2021.


    6. All the Ministries/Departments are requested to bring the contents of this OM to the notice of all its Attached and Subordinate offices for their information.'




    Hindi version of this Office Memorandum will follow. 


    (B.K. Man than) 

    Deputy Secretary to the Govt, of India


    Annexure-A


    Example:


    Pay of an employee: Rs 1,38, 500 and has family of 4 eligible for economy class air travel.


    Leave Encashments (1,38,500 x 1.17) xlO / 30 = Rs. 54,015

    Fare Value : Rs. 20,000 x 4 = Rs. 80,000

    Total Value = Rs. 1,34,015

    Amount to be spent for full cash benefit = Rs. 54,015 + 2,40,000* = Rs. 2,94,015


    (a) Share of Leave Encashment in total = 54,015 X 100 / 2,94,015 = 18%


    (b) Share of Fare in total = 80,000 X 100 / 2,94,015 = 27%


    * 3 times of notional airfare


    • Thus, if an employee spends Rs. 2,94,015 or above, he will be allowed cash amount of Rs. 1,34,015.


    • However, if the employee spends Rs. 2,40,000 only, then he may be allowed 18 % on account of Leave Encashment (Rs. 43,200) and 27% on account of fare value (Rs. 64,800). The total amount payable shall be Rs. 1,08,000.



    2. FAQ-Series 1 on LTC Cash Voucher Scheme dated 20.10.20


    No. 12(2)/2020-E.II(A)

    Government of India

    Ministry of Finance

    Department of Expenditure


    North Block, New Delhi

    Dated: 20th October, 2020


    OFFICE MEMORANDUM


    Subject: Clarification regarding queries being received in respect of Special cash package equivalent in lieu of Leave Travel Concession Fare for Central Government Employees during the Block 2018-21.


    The undersigned is directed to refer to this Department’s O.M of even no. dated 12th October, 2020 and to say that this Department has been receiving queries seeking clarification relating to Special Package equivalent in lieu of Leave Travel Concession Fare for Central Government Employees during the Block 2018-21 announced by the Government. A statement giving answers/clarifications to the queries is attached as annexure to this O.M.


    2. This issues with the approval of Secretary (Expenditure).



    S Naganathan

    Deputy Secretary, E.II(A)



    FAQ on LTC Cash Voucher Scheme


    1. Whether the individual employee is required to take leave to avail this LTC- Cash Voucher Scheme? Whether an employee is required to undertake any travel?


    An individual need not take leave for this purpose nor undertake any travel. This is a scheme in lieu of LTC travel.


    2. 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 is available and to what extent?


    This scheme is applicable to the LTC fare left unutilized during the Block Year as mentioned in the O.M. dated 12.10.2020.


    3. If an employee has already exhausted the prescribed limit of leave encashment for LTC, whether he will be eligible for the scheme? Whether an employee can only avail LTC fare without claiming leave encashment


    An employee can avail this scheme utilizing the applicable LTC fare without leave encashment. The expenditure should be in accordance with the ratio as prescribed for LTC fare.


    4. As per the scheme, an amount of upto 100% leave encashment and 50% of the value of deemed fare is to be paid as an advance to the employee opting for the scheme. It has also been stated that non­ utilization / under-utilization of advance is to be accounted for by the DDOs in accordance with extent provisions relating to LTC advance. If an employee spends only the advance amount and makes a claim, how this claim will be regulated?


    If as per the calculation suggested in O.M. No. 12(2)/2020-E.IIA dated 12th October. 2020, the reimbursable amount is less than the advance drawn, this would be treated as under-utilization. However, after calculation of the claim, balance amount, if any may be recovered from the employee.


    5. Newly joined Government employees are entitled for three Home Town and one Anywhere in India in a Block of four year. How this will be regulated?


    The employee may use any one of the LTC available in a Block Year.


    6. 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.


    7. 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 O.M. till the end of the current Financial Year. The purchase should carry a GST of 12% and above and payment should have been made to digital mode.


    8. 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 advance is required for the purpose the same is to be mentioned.


    9. 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.


    10. An employee having four family members eligible for LTC wants to avail this facility for less than 4 members. Further he wants to avail LTC for rest of the Members later.


    As replied to query at S.No. 2, an employee can avail 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 LTC subject to extent instructions under LTC rules.


    11. An employee incurs the expenditure on or before 31/3/2021 on the basis of invoice. Actual product or service received in April, 2021.


    The reimbursement is based on production of 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.


    12. For digital payment an employee uses 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 the scheme.


    13. Can services like interior decoration and phone bills be included?


    Any service which is having a GST component of more than 12% is permissible.


    14. Any limit of number of transaction?


    As far as possible, the number of transactions may be limited to a minimum extent to avoid any difficulty/delay.


    15. Is it allowed to do purchase from e-commerce platform?


    Procurement from e-commerce platform is also permissible provided the relevant invoice/details are submitted.


    3. Clarification on LTC Cash Voucher Scheme dated 04.11.20



    F. No.12(2)/2020-EII(A)

    Government of India

    Ministry of Finance

    Department of Expenditure

    E.II(A) Branch


    North Block, New Delhi 

    4th November, 2020


    Office Memorandum


    Sub: Special Cash Package equivalent in lieu of Leave Travel Concession Fare for Central Government Employees during the Block 2018-2021 -Clarification reg.


    The undersigned is directed to refer to O.M. of even number dated 12th October 2020 and the Frequently Asked Question (FAQ) issued vide O.M. of even number dated 20th October, 2020 on the subject mentioned above.


    2. Ministries/Departments have raised queries / clarifications with regard to (i) whether the advance taken as per the scheme shall be settled within 30 days of disbursal of advance and (ii) whether the invoice can be in the name of spouse and / or any family member who are eligible for LTC,


    3. The Special Cash Package Scheme in lieu of one LTC is to compensate and incentivise consumption by Government Employees and the benefits can be availed up to 31.03.2021. Para 4 of O.M dated 12.10.2020 provides for advance to Government employees in lieu of LTC fare and Leave encashment. 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:


    (i) the advance taken under the scheme shall be settled on or before 31st March, 2021, and 


    (i) the invoices of the goods and services purchased as per the scheme may be in the name of spouse or any family member who are eligible for LTC Fare.


    4. This issues with the approval of Secretary (Expenditure)


    (B. K. Manthan)

    Deputy Secretary to the Govt of India


    4. FAQ-Series 2 on LTC Cash Voucher Scheme dated 10.11.20


    No. 12(2)/2020-E.II(A) 

    Government of India 

    Ministry of Finance

    Department of Expenditure


    North Block, New Delhi 

    Dated 10th November, 2020


    OFFICE MEMORANDUM


    Subject: Clarification regarding queries being received in respect of Special cash package equivalent of Leave Travel Concession Fare for Central Government Employees during the Block 2018-21 (FAQ No. 2).


    The undersigned is directed to say that this Department has been receiving a number of queries relating to Special Package equivalent in lieu of Leave Travel Concession  Fare for Central Government Employees during the Block  2018-21 announced by the Government on 12th October, 2020. A set of frequently asked questions have already been clarified vide this Department’s O.M. of even No. dated 20th October, 2020 and is available on this Department’s website viz. Doe.gov.in.


    2.  A  further set of frequently asked questions have been clarified and are attached herewith at Annexure-‘A’.


    3. This issues with the approval of Competent Authority.



    S Naganathan

    Deputy Secretary, E.II(A)


    FAQ No. 2


    FAQ on LTC Cash Voucher Scheme


    1. An employee whose workplace and hometown are 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.


    2. If an employee does not have enough leave or less than the minimum balance of 40 days which is required in his leave and avail leave account encashment for LTC, whether he eligible for will be leave encashment in this scheme?


    Leave encashment is to be in accordance with LTC Rules. The employee can however avail the benefit of scheme without the leave encashment if such encashment is not available.


    3. 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 block year 2020-21 and for remaining family members from block 2018-19?


    Yes. He can claim leave encashment as per the scheme provided it does not exceed the maximum limit of 60 days eligible for encashment.


    4. 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 leave encashment, then can the spouse avail LTC leave encashment separately?


    Yes


    5. If an employee avails only deemed LTC fare without leave encashment, and spends less than or equal to three times of the deemed fare entitlement, how much reimbursement will he get?


    Reimbursement will be on pro-rata basis.


    6. Whether 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 EMI basis are also permissible. The purchase should have been effected after the issue of the order i.e. 12.10.2020 and should have an invoice.


    7. For those officials having three Hometown LTCs and one all India LTC, can they avail special cash package for year 2020 in 2021(upto 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.


    8. 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 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.


    9. Since the fresh recruits are not allocated block year, can they avail this scheme?


    Yes


    10. Can the payment be made by cheque /DD / Banker's Cheque/ NEFT/RTGS?


    Yes


    11. If a defence employee wants to buy a car from defence canteen, attracting only 14% GST as against 28% GST in the market, can he avail this scheme?


    As per scheme Goods & Services attracting GST of 12% or more can be purchased.


    12. If an employee has already exhausted 60 days of Leave Encashment, can he further avail 10 days Leave Encashment?


    No. He can avail only deemed fare value.


    12. If an employee is availing Cash scheme against 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.


    14. 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.


    15. Is this scheme applicable to the Autonomous Bodies?


    Autonomous Bodies can adopt the scheme provided they are already implementing LTC scheme similar to the Central Government's Scheme, before 12.10.2020. 


    16. Whether any advance will be given like LTC advance?


    Please refer to para 4 of Ministry of Finance, Department of Expenditure OM No. 12(2)/20/E-IIA dated 12.10.2020. It has been stated that 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 employee.


    17. Whether purchase we can different items under this scheme like purchase washing we machine, mobile, AC or not?


    Yes. An individual can purchase different items which attract GST of 12% and more. The payment should be made through digital mode.


    18. I availed home LTC in 2019. What is my eligibility position for 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.


    19. How spending of 3 to 4 times on purchasing of products will be tracked? Will purchase made online from e-commerce website be acceptable?


    Any purchase with digital mode is to be supported by invoice. Based on production of invoice the spending is calculated. The intention of this scheme is to encourage every mode of purchase. It is for the employee to choose a suitable digital mode. 


    20. 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. 


    21. Whether the advance taken under the scheme is to be settled within 30 days of disbursal of advance as stipulated under LTC rules. Can receipt be in the name of any dependent?


    The Special Cash Package Scheme in lieu of one LTC is to compensate and incentivise consumption by Government Employees and the benefits can be availed up to 31.03.2021. Para 4 of O.M. dated 12.10.2020 provides for advance to Government employees in lieu of LTC fare and Leave encashment. 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:


    (i) The advance taken under the scheme shall be settled on or before 31st March 2021, and


    (ii) the invoices of the goods and services purchased as per the scheme may be in the name of spouse or any family member who are eligible for LTC Fare as declared in the Service records.


    5. FAQ-Series 3 on LTC Cash Voucher Scheme dated 25.11.20



    No.12(2)/2020/E.II.A

    Government of India

    Ministry of Finance

    Department of Expenditure


    North Block, New Delhi 

    Dated 25th November, 2020 


    OFFICE MEMORANDUM


    Subject:- Clarification regarding queries being received in respect of Special Cash Package equivalent in lieu of Leave Travel Concession Fare for Central Government Employees during the block 2018-21 (FAQ No.3)


    The undersigned is directed to say that this Department has been receiving a number of queries relating to Special Package equivalent in lieu of Leave Travel Concession Fare for Central Government Employees during the block 2018-21 announced by the Government on 12th October, 2020. Two sets of frequently asked questions have already been clarified vide this Department’s OM of even no. dated 20th October, 2020 and 10th November, 2020 are available on this Department’s website viz. doe.gov.in.


    2. A further set of frequently asked questions have been clarified and is attached herewith at Annexure below.


    3. This issues with the approval of Secretary (Exp.).


    S Naganathan

    Deputy Secretary, E.II(A)


    FAQ No. 3


    1. An employee wishes to avail the special cash package without opting for leave encashment. As per records he has sufficient EL for encashment purpose. 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 this scheme utilizing the applicable LTC fare without opting for leave encashment. Leave encashment is optional.


    2. 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 pro-rata basis. Since in order 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 1/3rd of the actual expenditure. An illustration of calculation is given at annexure attached below.


    3. 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.


    4. 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.


    5. 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, self attested photocopy would suffice. However, the original bills may be produces on demand for information.


    6. The vouchers/bills to be submitted to avail 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 his superannuation i.e. before the 31st December 2020.


    Vouchers/bills should be submitted and settled before the date of superannuation in this case.


    Annexure-


    Example (1) (without Leave Encashment)


    Claiming for family of 4 eligible for economy class air travel.


    Fare Value     : Rs.20,000 x 4 = Rs.80,000


    Amount to be spent for full cash benefit = Rs.80,000 x 3* = Rs.2,40,000 


    * 3 times of notional airfare (80,000 x 3=2,40,000)


    Cash benefit = Amount Spent X deemed LTC Fare (80,000 in this case) 

    Amount to be spent for full cash benefit


    Thus, if an employee spends say Rs.2,40,000 or above, he will be allowed cash amount of Rs.80,000. However, if the employee spends less than Rs.2,40,000, say 1,80,000 then he may be allowed cash amount in the same proportion as illustrated above which comes out Rs.60,000 in this case.


    [1,80,000X 80,000 / 2,40,000= 60,000],



    Example (2) (without Leave Encashment) 


    Claiming for family of 4 eligible for Train travel.


    Fare Value : Rs.6,000 x 4 = Rs.24,000


    Amount to be spent for full cash benefit = Rs.24,000 x 3* = Rs.72,000


    Cash benefit = Amount Spent X deemed LTC Fare (24,000 in this case) 

    Amount to be spent for full cash benefit


    * 3 times of notional trainfare (24,000 x 3=72,000)


    Thus, if an employee spends Rs.72,000 or above, he will be allowed cash amount of Rs.24,000. However, if the employee spends less than Rs.72,000 say 48,000 then he may be allowed cash amount in the same proportion as illustrated above which comes out Rs. 16,000 in this case.


    [48,000 X 24,000 / 72,000 = 16,000].



    ========================================



    6. CBDT Press Release dated 29.10.20 extending LTC Cash Voucher Scheme to private sector employees 



    Government of India

    Department of Revenue 

    Ministry of Finance 

    Central Board of Direct Taxes


    New Delhi, 29th October, 2020


    PRESS RELEASE


    Income-tax Exemption for payment of deemed LTC fare for non-Central Government employees


    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 Leave Travel Concession (LTC) in the current Block of 2018-21.


    2. With a view to compensate Central Government employees and incentivise consumption, thereby giving a boost to consumption expenditure, the Government of India allowed payment of cash allowance equivalent to LTC fare to Central Government employees subject to fulfilment of certain conditions vide OM No F. No 12(2)/2020-EII (A) dated 12th October 2020. It has also been provided that since the cash allowance of LTC fare is in lieu of deemed actual travel, the same shall be eligible for income-tax exemption on the lines of existing income-tax exemption available for LTC fare.


    3. In order to provide the benefits to other employees (i.e. non-Central Government employees) who are not covered by the above mentioned OM, it has been decided to provide similar income-tax exemption for the payment of cash equivalent of LTC fare to the non-Central Government employees also. Accordingly, the payment of cash allowance, subject to maximum of Rs 36,000 per person as Deemed LTC fare per person (Round Trip) to non-Central Government employees, shall be allowed income- tax exemption subject to fulfilment of conditions specified in para 4.


    4. The income-tax exemption to receipt of deemed LTC fare by a non-Central Government employee (‘the employee’) shall be allowed subject to fulfilment of the following conditions:-


    (a) The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21.


    (b) The employee spends a sum equals to three times of the value of the deemed LTC fare on purchase of goods / services which carry a GST rate of not less than 12% from GST registered vendors / service providers (‘the specified expenditure’) through digital mode during the period from the12th of October, 2020 to 31st of March, 2021 (‘specified period’) and obtains a voucher indicating the GST number and the amount of GST paid.


    (c) An employee who spends less than three times of the deemed LTC fare on specified expenditure during the specified period 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 as explained in Example-A below.


    5. The DDOs shall allow income-tax exemption subject to fulfilment of the above conditions after obtaining copies of invoices of specified expenditure incurred during the specified period. Further, as this exemption is in lieu of the exemption provided for LTC fare, an employee who has exercised an option to pay income tax under concessional tax regime under section 115BAC of the Income-tax Act, 1961 shall not be entitled for this exemption.


    6. The clarifications issued by the Department of Expenditure, Ministry of Finance for the Central Government employees vide OM F. No 12(2)/2020-EII (A) Dated 20th October, 2020 and subsequent clarification, if any, issued in this regard shall apply mutatis mutandis to non-Central Government employees also subject to fulfilment of conditions specified in the preceding paras.


    7. The legislative amendment to the provisions of the Income-tax Act, 1961 for this purpose shall be proposed in due course.


    Example-A


    Deemed LTC Fare : Rs.20,000 x 4 = Rs. 80,000 


    Amount to be spent : Rs. 80,000 x 3 = 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% (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% of the required amount.


    (Surabhi Ahluwalia) 

    Commissioner of Income Tax 

    (Media & Technical Policy) 

    Official Spokesperson, CBDT




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