The Finance Ministry, on October 29, 2020, said that people who have opted for the lower tax regime that was launched in Budget 2020-21, would not be eligible for the new incentive package provided under the leave travel concession (LTC) scheme.
“As this exemption is in lieu of the exemption provided for LTC fare, an employee who has exercised an option to pay income tax under the concessional tax regime, shall not be entitled for this exemption,” clarified the revenue department.
The government, on October 12, 2020, launched the LTC cash voucher scheme for central government employees, with an aim to stimulate consumer demand. Tax concession for LTC tickets is also available for state government and private sector staff, too, if they choose to give such facility, the centre said.
See also: Impact of new tax slab on home bueyrs
What is the LTC cash voucher scheme?
Under the LTC cash voucher scheme, government employees can purchase goods and services in lieu of the tax-exempt portion of the LTA and claim tax-exemption if the amount is spent, meeting specific conditions during 2018-21.
An employee who opts for this scheme, will be required to buy goods/services worth three times the fare and one time the leave encashment, before March 31, 2021. The items purchased should attract GST of 12% or more. While only digital transactions are allowed, the GST invoice must also be produced by the taxpayer.
Also read all about GST impact on home buyers
“The biggest incentive for employees to avail of the scheme, is that in a four-year block ending in 2021, the LTC not availed will lapse. Instead, this will encourage employees to avail of this facility to buy goods, which can help their families,” the government notification issued on October 12, 2020, said.
Further clarifying the benefits of the scheme earlier, the government also said a central government employee claiming LTC is not eligible unless he actually travels. “If he fails to travel, the amount is deducted from his pay and he may be liable for disciplinary action. He does not have the option of keeping the money and paying income tax,” the Finance ministry said in a press release, on October 13, 2020.
“Under the government system, the employee had only two choices – travel and spend or forgo the entitlement, if not claimed within the date. Now, a third option of spending on something other than travel has been given. In the current COVID-19 environment, travel carries serious perceived health risks,” it said.
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
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