LTC cash voucher scheme 2020, Tax Benefits Available on LTC
What is the LTC cash voucher scheme 2020?
Under LTC Cash Voucher Scheme, the Government has decided to give cash payment to employees in lieu of one LTC during 2018-21, in which full payment on Leave encashment and LTC fare in 3 flat-rate slabs depending on the class of entitlement will be given.
What is the Tax benefit of this scheme?
Reimbursement of Leave Travel Compensation or LTC is exempt from tax. Since this scheme is in line with LTC, same shall be exempt from Tax.
What are the conditions required to be fulfilled in order to get, LTC Tax benefit?
- An employee, opting for this scheme, will be required to buy goods/services worth 3 times the fare and 1 time the leave encashment before 31st March 2021.
- Money must be spent on goods attracting GST of 12% or more from a GST registered vendor.
- Payment should be made through digital mode
- The employee is required to produce a GST invoice to avail of the benefit.
What is Deemed LTC Fare for this purpose?
- Employees who are entitled to business class of airfare: Rs. 36,000 (per person Round Trip)
- Employees who are entitled to an economy class of airfare: Rs. 20,000 (per person Round Trip)
- Employees who are entitled to Rail of any class: Rs. 6000 (per person Round Trip)
Is this scheme applicable to Private Sector Employees?
This scheme is open for government, PSU, and private sector employees. However, typically private-sector employees do not get LTC, so it totally depends on the organization if they want to adopt it.
How LTC is there in the salary package?
LTC is required to be availed of by government employees by availing of leave and undertaking travel, failing which, it lapses.
In the case of Pvt. sector, LTC is usually a component of the overall “cost-to-company” package for employees and it is paid as taxable allowance if not availed of by the employee by going on leave and undertaking travel.
Now, in this scheme, you are being given an exemption from taking travel, instead, you can buy goods/services. Employees can avail this scheme as per their requirements.
Should I opt for this scheme?
A person opting for this scheme needs to make 3 times expenditure on the amount you are getting. For Example, if you are getting an LTA of Rs. 15,000 you need to make an expenditure of Rs. 45,000. Also, the Goods/Service purchased should come in the ambit of 12% GST Bracket. Thus, this scheme would be beneficial for you if you are planning to buy items like Mobile, Washing Machine, Laptops, etc.
Will TDS be deducted from LTC Amount Paid?
No, since LTC is exempt from Tax, then there is no requirement to deduct TDS on the same.
Some of the issues that require clarification are:
- The date of implementation of this scheme,
- Amount to be claimed one time or can be broken into small expenditure
- GST Invoice has to be made under name of a family member or the employee only