The Center has recently introduced an LTC cash voucher system for central government and public sector employees. An employee is eligible for LTC and leaves a 10-day charge to travel to their hometown or any other destination twice in a four-year block. The cost of the ticket is exempt while the fee for the license is taxable. As travel has become restricted in the wake of the coronavirus pandemic, central government employees now have the option to take advantage of the cash equivalent of the entitled LTC rate and license fee. As travel has become restricted in the wake of the coronavirus pandemic, central government employees now have the option to take advantage of the cash equivalent of the entitled LTC fare and license fee.
Employees are now eligible to purchase goods and services in lieu of the tax-exempt portion of the LTA or LTC.
But to take advantage of this scheme, an employee must spend an amount equal to the value of the license fee and an amount three times greater than the cash equivalent of the estimated fee, on the purchase of available items or services. Spending must be made through digital modality before March 31 on goods and services that attract GST of 12% or more. The employee will need to obtain a voucher showing the GST number and the amount of GST paid.
The estimated LTC fee for this purpose is as follows:
1) Employees entitled to business class airfare: ₹36,000 (per person round trip)
2) Employees entitled to economy class airfare: ₹20,000 (per person round trip)
3) Employees who have the right to Railways of any kind: ₹6,000 (per person round trip)
Govt LTC is quite different from LTA in business sector
“The government LTC is quite different from the leave travel allowance in the corporate sector. A person who claims an LTC is not eligible unless he actually travels; if he does not travel, the amount is deducted from his salary and he may be liable for a disciplinary action. He does not have the option to keep the money and pay the income tax, “the Finance Ministry said in a note.
Under the government system, the employee had only two options: 1) Travel and spend (and unforeseen expenses such as hotel, food, etc. must be borne by him) or 2) Give up the right if he does not claim it within the date. Now a third option has been given to “spend on something other than travel.” In today’s COVID environment, travel carries serious perceived health risks, according to the Finance Ministry statement.
Should you go for it?
This scheme is completely optional and employees can choose to use the scheme or opt for regular LTC in subsequent years on the block. The current block is between 2018-2021. It should be noted that to take advantage of this package, an employee must opt for both the license fee and the LTC fee.
“Those employees who did not plan to make use of the LTC or who could not do so due to fear of the pandemic, have the opportunity to claim LTC under the new scheme, which otherwise would have expired on March 31, 2021.” said Nand Kishore, partner at DSK Legal.
“The benefit is only to the extent of the cash reimbursement of the maximum amount of LTC eligible for them. In other words, the goods or services that the employee chooses to use to claim the benefits will be available at a discount due to this reimbursement.” , Divakar Vijayasarathy, Founder and Managing Partner, DVS Advisors LLP.
“Tax exemption, TDS will not be required to be deducted from the LTD estimated fee refund,” said Angad Sandhu, Partner at PSL Advocates & Solicitors.
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