Employee LTC Cash Voucher Scheme And How To Claim It
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In the current financial year, COVID-19 has made all of us to stay at home and hence few people could go on vacation or travel unlike every year. Many employees have leave travel concession (LTC) included in their CTC package. This component is tax free to the extent of actual expenses on travel as per section 10(5) of the Income tax Act. However, this year because of travel restrictions, this tax exemption in respect of LTC Block of 2018–21 was potentially going waste. The central government announced a substitute for such travel requirement in the form of a LTC Cash Voucher Scheme. This scheme was extended to private sector in December, 2020. This scheme is now notified in Budget 2021.
As per this scheme, you do not need to travel for claiming the tax exemption. The employee must incur expenditure on goods and services which are liable to GST at 12 per cent or more. Such goods or services must be purchased from GST registered vendors or service providers. The employee is expected to purchase such goods and services in the period from 12/10/2020 to 31/03/2021.
The maximum limit for tax exemption is INR 36, 000 per person in employee’s family or one-third of the amount spent on such GST liable goods and services, whichever is lesser.
The payment for such goods and services should be made only through banking channels such as cheque/DD/credit or debit cards or digital modes such as UPI. Cash payments are not allowed. The employee shall submit invoices to employer, mentioning vendor, GST number and GST paid.
The benefits of LTC Cash Voucher scheme are available in Old Tax Regime. If you are planning to avail new tax regime, this scheme won’t be applicable from tax exemption point of view.