Greetings,
Among
them, the salaried class would be most happy with the LTC CASH VOUCHER SCHEME.
Because this scheme is not restricted to the Central Govt Employees, but even
the Private sector employees too are eligible to claim the leave travel
allowance.
Employees
can claim tax exemption on spending the LTC amount, by satisfying certain other
conditions, without the need for actual travel.
The exemption is available to both government and non-government employees.
Instead
of incurring expense on travel, the employee can now furnish proof for
purchases made / services availed and avail the tax exemption.
The tax exemption will be restricted to the deemed LTC fare of up
to maximum of Rs 36,000 per person for a round trip
The
employee will be required to buy goods/avail services worth 3 times the
deemed LTC concession fare and worth 1 time the value of leave encashment.
If
the amount spent is short of the requirement, then the exemption would be
allowed proportionately.
So,
for example , if the deemed LTC Fare is Rs 80,000 (Rs 20,000 x 4),
then the amount to be spent under the scheme is Rs 2,40,000.
The
scheme was introduced to make use of the unused LTC for the current block of
2018-21 that would otherwise lapse since employees could not fully utilize it
due to disruptions caused by COVID-19.
What is LTC or Leave Travel Concession?
LTC
or leave travel concession is an allowance available to the employees. This
allowance is applicable for travelling to your declared hometown along with
your eligible family members.
Some clarifications :
-The goods/services bought should be those attracting GST of 12% or more and
should be bought from GST registered vendors/service providers.
-Only
digital transactions are allowed and GST invoice is to be produced.
-Expenditure should be incurred between 12 October 2020 to 31 March 2021 –
-Purchase
of goods or services on EMI is also permissible under the scheme, provided they
have been bought after 12 October and have a GST invoice.
-The
government has also clarified that even services like interior decoration and
phone bills are accepted provided GST is 12% or more.
Some
more Clarifications :
1.
I availed home LTC in 2019. What is my eligibility position for the LTC cash
voucher scheme?
This scheme is for the LTC block of 2018-21. Normally, a
block contains two LTC fare (home town and anywhere in India). If one has been
availed and the other remaining, the same can be utilized for this purpose. Any
unutilized LTC of the block of 2018-21 is eligible.
2.
Whether any advance will be given like LTC advance?
Yes, an amount up to 100% of leave encashment and 50% of the value of deemed
fare may be paid as advance into the bank account of the employee.
3.
Whether a single bill of purchase of goods or services is to be submitted or
multiple bills can be submitted?
Multiple Bills are accepted. The purchase should have been done from the date
of issue of the OM ie 12.10.2020 till the end of the current Financial Year.
FOR
ME THE BIGGEST POINT IS THIS....
Life insurance and Health Insurance premium eligible for
reimbursement under LTC cash voucher scheme
Lets see this with an example:
Mr A is an employee with 4 eligible family members. Let us assume he
is entitled to leave a travel allowance of Rs. 156,000 from the employer-based on
his compensation structure.
He
can avail the LTC exemption only for the lower of Rs. 144,000 (Rs. 36,000
deemed fare per person for 4 members) and Rs. 156,000 (actual entitlement).
For
claiming this exemption, he will have to invest in the specified expenditure 3
times the amount of 144,000, i.e, Rs. 4,32,000. The differential of Rs. 12,000
(156,000-144,000) would be taxable. If the employee spends less, then the
entitlement/benefit shall also be reduced proportionately.
Continuing
the above example: If he incurs expenditure of only Rs. 240,000, then the
exemption will be restricted to Rs. 80,000 (i.e 2,40,000/4,32,000*144,000). The
balance amount of Rs. 76,000 (Rs. 156,000-80,000) would be taxable.
Since the movement of individuals have been severely restricted in the lockdown situations, this is a welcome initiative by the government to boost consumer the demand which would then lead to increased spending and revive the
Indian economy.
Note :
Payment of premium for new insurance policies purchased between 12 October 2020
and 31 March 2021, is eligible for the benefit under the scheme. This is not
applicable to existing insurance policies.
Do
consult your Tax Advisor / Tax Expert before taking any decision.
Regards,
Srikanth
Matrubai,
Wealth
Architect,
Author
: Don’t Retire Rich
