How to claim LTC Cash Voucher exemption in your income tax return

How to claim LTC Cash Voucher exemption in your income tax return Due to the covid-19 pandemic, the government introduced an LTC cash voucher system …

Sonali Maity

Sep 13, 2021

Last update on Sep 13, 2021

How to claim LTC Cash Voucher exemption in your income tax return

Due to the covid-19 pandemic, the government introduced an LTC cash voucher system in October 2020, which allowed salaried taxpayers qualified for LTC/LTA to claim the allowance tax-free without having to travel by purchasing products and services that met the scheme's requirements. A pandemic driven lockdown, according to the government, prevented individuals with LTC/LTA in their salary packages from travelling and claiming income tax exemption on their trip tickets. As an alternative, the government developed the LTC Cash Voucher scheme to allow such persons to claim their LTC/LTA amount as tax-exempt. In order to take advantage of this programme, an individual required to make digital purchases of goods and services with a GST of 12 percent or more between October 12, 2020 and March 31, 2021. Tax exempt LTA/LTC would allow the individual to claim one third of the bill's amount as tax-free LTA/LTC without submitting any proof of travel. When completing your ITR, if you used the LTC Cash Voucher scheme in FY 2020-21, here's how to claim the money that you received from it as tax-free. Maximum amount that can be claimed

In order to qualify for the LTC Cash Voucher Exemption, certain requirements had to be satisfied first. A person could claim a maximum of one-third of the amount spent or Rs 36,000 per family member, whichever was smaller, by providing bills (of purchases as stipulated in the scheme) to their employer once these requirements were met.

Let's say you paid Rs 39,000 for a tablet or laptop (inclusive of GST at 18 percent ). The amount for which you will be able to claim a tax exemption will be the lesser of:

a) One-third of amount spent, i.e., one-third of Rs 39,000 = Rs 13,000 b) Rs 36,000

As a result, you'll be entitled for a maximum tax exemption of Rs 13,000 in the case above. "The maximum tax exemption available is Rs 36,000 per person, thus a family of four can claim a total maximum tax exemption of Rs 1.44 lakh," Sujit Bangar, an ex-IRS official and founder of Taxbuddy.com, an ITR filing service, explains.

He goes on to say that if a taxpayer makes a cash payment, he or she will not be eligible to claim tax relief under the LTC Cash voucher scheme for that payment.

How do I claim the LTA Cash Voucher scheme on my tax return?

If you submitted valid bills to your employer, the tax on the amount paid to you from your LTA/LTC should not have been deducted. In your Form 16, this sum would also be claimed as tax free.

In the words of Bangar "According to section 10(5) of the Income-tax Act of 1961, the LTA Cash Voucher programme will be exempt from paying taxes. The amount of tax-exemption you are allowed to claim must be listed on the Schedule of Exempted Income on the income tax return form."

The terms and conditions of the LTC cash voucher scheme

The following conditions had to be met in order to be eligible for the LTC Cash Voucher tax exemption: a) An employee was obliged to spend three times the considered LTC fare on products and/or services with a 12 percent or higher GST rate; b) Goods and/or services have to be purchased between October 12, 2020, and March 31, 2021. c) Paying for goods or services has to be done via digital modes such as a check, UPI or mobile wallets etc. We were not allowed to make payments in cash;

d) Invoices with the seller's GST number and the GST amount paid were required to be collected. It was required that these invoices be provided to the employer so that he may claim the benefit. The bills could be submitted in the name of a family member.