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Govt Issues 4th Set of FAQs on LTC Cash Voucher Scheme

govt-issues-4th-set-of-faqs-on-ltc-cash-voucher-scheme

In the series of FAQs on the LTC Cash Voucher Scheme for availing tax exemption on LTC without actual travel, the government has issued LTC Cash Voucher Scheme FAQ-4 on 10.03.2021 to clarify 5 new queries on the scheme just before a few days of the due date to avail the scheme.


The income-tax exemption on expenses incurred under the LTC Cash Voucher Scheme is legislated in the law by the Finance Bill, 2021. It is stated in the proposed amended provisions that the rules for claiming the LTC exemption without actual travel will be framed by the CBDT. However, it appears that the Office Memorandums so issued by the government including the FAQs on the Scheme will be adopted by the CBDT.



The government has announced the LTC Cash Voucher Scheme for Central Government employees as well as for non-central government employees including employees of private sectors for the LTC block period of 2018-2021 to provide for tax exemption on LTA/LTC amount received in lieu of actual travel. The government has issued various clarifications in the form of FAQs on LTC Cash Voucher Scheme which are reproduced here.


Synopsis of the 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.


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 of 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.


In continuation of issuing clarifications by the government in the form of FAQs, the FAQ Set 4 of the LTC Cash Voucher Scheme is issued on 10.03.2021 clarifying 5 new queries on various aspects of the Scheme. 


The 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 is reproduced below.


 FAQ-Series 4 on LTC Cash Voucher Scheme dated 10.03.21


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

Government of India

Ministry of Finance

Department of Expenditure


North Block, New Delhi 

Dated 10th March 2021 


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 say that this Department has been receiving a number of queries relating to Special Cash 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. Three sets of Frequently Asked Questions (FAQs) have already been clarified vide this Department’s O.M. of even number dated 20lb October 2020, 10th November 2020 and 25th November 2020 on the subject mentioned above.


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.


(Sunil Kumar)

Under Secretary to the Govt, of India


Annexure-A

FAQ No. 4


1. Whether the full and final settlement of the bills pertaining to LTC Cash Scheme is also to be ensured by 31s1 March, 2021, without any scope of spill over to the next financial year?


As far as possible, the claims should be made and settled well before 31st March, 2021, Ministries/Departments may consider settlement of only those claims/purchases made on or before 31st March, 2021 beyond the due date, i.e. 31st March, 2021.


Whether payment detail of digital instrument used for making payment against this scheme is to be furnished by the employee, along with the claim?


It is clarified that it is for the competent authority of concerned Deptt/PAO to decide on additional document for checking the veracity of claim.


Is the scheme admissible if payment is made digitally through friend, relative or any other person?


It has already been clarified in point 12 of the FAQ issued vide O.M No. 12(2)/2020-E.II.A dated 20.10.2020 that for digital payment an employee can use credit card of himself/herself, spouse or any family member.


For newly recruited officials having three Hometown LTC and one all India LTC, can they avail Special Cash Package for year 2020 in 2021 (upto 31.03.2021) if item is purchased after 31.12.2020 but before 31.03.2021, that is without prior intimation to office?


A newly recruited employee, whose LTC expires in December, 2020 which remains unutilized, may be allowed to claim the cash package in lieu of that LTC till 31st March, 2021.


Portion of the payment was made in cash as against digital payment for the entire transaction. Whether this will be eligible under the Scheme?


The portion of digital payment may be allowed to be reimbursed subject to other conditions as contained in the O.M. dated 12.10.2020.


Download Office Memorandum dated 10.03.2021 including FAQ-4 on LTC Cash Voucher Scheme in pdf format



Read Also on LTC Cash Voucher Scheme:

 

FM Announces tax-free LTC Cash Vouchers, Special Festival Advance and Other Schemes to Boost Demand

 

Tax Exemption on LTC Cash Voucher Extended to Private Sector Employees

 

Is LTC Cash Voucher Scheme Beneficial for Private Sector Employees

 

Legislative Amendment to LTC Cash Voucher Scheme to Provide Income Tax Exemption without Travelling



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2 Comments

  1. As I ordered t.v on Amazon as on 31.03.21 and payment also made on the same day by net banking. But invoice bears date of 03.04.21. M I eligible for LTC cash benefit scheme?

    ReplyDelete
    Replies
    1. No the invoice date falls beyond 31st March. Hence not eligible.

      Delete