Clearing up doubts about LTC’s latest cash voucher scheme, the Finance Ministry said the latest scheme offers employees an option to “spend on more than just travel.” To boost consumption, the central government introduced the LTC cash voucher scheme on Monday. Central government employees and UPMs are now eligible to purchase goods and services in lieu of the tax-exempt portion of the License Travel Grant or License Travel Permits (LTC / LTA).
A central government employee is eligible for LTC and 10-day leave pay to travel to the city of origin 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 been 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. However, there are certain cyclists.
“The government LTC is quite different from the travel allowance for leave in the business sector. A person who claims 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 of keeping the money and paying income tax, “explained the Ministry of Finance.
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, traveling carries serious perceived health risks, according to the Finance Ministry statement.
To take advantage of the benefits of the LTC cash voucher program, an employee must meet these conditions
a) Employees have to buy goods or services worth three times the LTC and one time the amount of the license fee in order to buy non-food items, that is, household appliances.
b) The money must be spent on goods that attract a GST of 12% or more from a GST registered supplier via digital mode.
c) Said purchase must be from suppliers registered in GST or service providers through digital mode. The employee will need to obtain a voucher showing the GST number and the amount of GST paid.
d) Money on goods / services must be spent before March 31, 2021.
“Central government employees are the least affected in terms of savings due to the lockdown and without loss of salary. It is precisely for this reason that they are in a position to boost their own spending on goods or services of their choice, using LTC money as well. , a big discount to reduce the cost of what they choose to buy, “the ministry added.
“This scheme is more likely to be taken advantage of only by employees who plan to spend a lot during the holiday season, given that one needs to spend three times the amount of LTC to claim the benefits of the scheme and the tax exemption until March 31, 2021 “. said Puneet Khurana, director of human resources for Paisabazaar.com.
“This scheme is completely optional and employees can choose to use the scheme or opt for regular LTC in subsequent years on the block,” said Divakar Vijayasarathy, founder and managing partner of DVS Advisors LLP.
However, some clarification is needed about the LTC cash voucher system.
“The employee must spend the full amount (equal to three times the LTA received) at one time or it can be divided into a smaller number of purchases. Given the government’s intention, it is likely that the amount can be spent on smaller purchases. . and the total amount of all purchases taken together through March 31, 2021 will be taken for tax exemption, “added Agarwal.
“The invoice must be in the name of the employee or family members to qualify for the exemption. Again, the invoice is likely also in favor of the employee or the employee’s family members. The rules they will clear the fog around all these issues, including the date on which this scheme will go into effect ”, he mentioned.
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