On Monday the Union Finance Minister Smt. Nirmala Sitharaman announced leave travel concession (LTC) cash voucher scheme to stimulate consumer spending that in turn will boost the economy during the pandemic.
According to Section 10(5) of the Income-Tax Act, 1961, read with Rule 2B, Income Tax exemption for Leave Travel Allowance (LTA) given to an employee. The employees can claim the LTA exemption when they by themselves or with their families travel within India.
Every four years, central government employees get LTC to any destination to their choice plus one to their hometown in the form of air or rail fare, as per pay scale or entitlement. The same is reimbursed and leave encashment (pay+Dearness allowance) of 10 days is paid to them. “Since travel is difficult to undertake during the pandemic, the government will pay the entitled fare as cash vouchers which have to be spent by March 31, 2021,” said the Finance Minister in a press conference.
According to the Government’s new LTC Cash Voucher Scheme, the employees can opt to receive cash amounting to leave encashment in place of one LTC during 2018-21 along with full payment on Leave encashment and LTC fare in 3 flat-rate slabs depending on the class of entitlement. But there is one condition the employees opting for this scheme has to buy goods or services worth three times the fare amount and one time the leave encashment amount received under this scheme and which attract a GST of 12 per cent or more, before March 31, 2021.
FM has also stated that to avail the tax-free payment benefit on LTC fare amount all the transactions are to be done digitally and the GST Invoice are also to be produced. Also, the LTC, if not availed, will lapse so this will encourage employees to avail of this facility to buy goods which can help their families.
“Indications are that savings of govt. and organized sector employees have increased, we want to incentivize such people to boost demand for the benefit of the less fortunate. On a conservative basis, we expect the LTC Cash Voucher Scheme to generate additional consumer demand in the range of Rs.28,000 crores, said the Finance Minister.
The Estimated cost of LTC Cash Voucher Scheme for the Central Government will come around Rs.5,675 crores and for PSBs & PSUs will be Rs.1,900 crores.
Also, the tax concessions for LTC tickets will be available for state governments and the private sector too, if they choose to give such facilities, these employees too can benefit.
With Warm Regards,