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LTC Cash Voucher Scheme - Should you Opt for it?

Puneet Taneja 
on 22 October 2020

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LTC CASH VOUCHER SCHEME

The Centre has recently introduced the LTC cash voucher scheme for the central government and public sector employees. An employee is eligible for LTC and leave encashment of 10 days for travel to home town or any other destination twice in a block of four years. The cost of the ticket is exempt whereas the leave encashment is taxable.

What is LTC?

Leave Travel Concession is an allowance that can be availed by an employee for travel of self and family members anywhere in India. The leave encashment portion is taxable in the hands of an employee. The amount of Leave Travel Allowance that can be claimed as tax-exempt is limited to the actual fare of rail/air/bus travel.

What is a block year?

As per the income tax provisions, Leave Travel Concession (LTC) benefit is required to be availed by the employees within a block of 4 years. The current block for the same is 2018-2021, i.e January 1, 2018, to December 31, 2020.

LTC Cash Voucher Scheme - Should you Opt for it

What is the eligible amount for LTC?

The deemed LTC fare for the purpose of Computation is as follows:

  1. Employees who are entitled to business class of airfare: ₹36,000 (per person Round Trip)
  2. Employees who are entitled to an economy class of airfare: ₹20,000 (per person Round Trip)
  3. Employees who are entitled to Rail of any class: ₹6,000 (per person Round Trip)

Is LTC different from LTA in the corporate sector?

"The government LTC is quite different from Leave Travel Allowance in the corporate sector. A person 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 note.

 

How will LTC be utilized?

Under the government system, the employee had only two choices:

  1.  Travel and spend (and the incidentals like a hotel, food,etc. are to be incurred by him),or
  2. Forgo the entitlement if not claimed within the date.
  3. Now a third option of "spend on something other than travel" has been given by the Finance Ministry. In the current COVID environment, travel carries serious perceived health risks, the statement by the finance ministry stated.

What is the declaration of the place of visit under LTC?

1. Visit the declared hometown or declared place in any place in India LTC is essential without this LTC claim will not be considered.

2. When the concession to visit any place in India is proposed to be availed of by a Government servant or any member of the family of such Government servant, the intended place of the visit shall be declared by the Government servant in advance to his controlling officer.

3. The declared place of the visit may be changed before the commencement of the journey with the approval of his controlling officer, but it may not be changed after the commencement of the journey except in exceptional circumstances where it is established that the request for change could not be made before the commencement of the journey owing to circumstances beyond the control of the Government servant.

How to utilize the LTC Cash Voucher Scheme?

This will encourage employees to avail of this facility to buy goods and services which can help their families. Some finer points related to the scheme are as below:

 

Cash equivalent of full leave encashment will be allowed, provided employees spend an equal amount.

The cash equivalent may be allowed if the employee spends a sum of 3 times the fare value of the deemed fare. Deemed fare for this purpose for a person are:

  1. Employees who are entitled to business class of airfare - Rs 36,000
  2. Employees who are entitled to the economy class of airfare - Rs 20,000
  3. Employees who are entitled to rail fare of any class - Rs 6,000

Employees have to purchase items/services which carry a GST rate of 12% from a registered person through digital mode and obtain a proper voucher indicating the GST number of the seller and the amount of GST paid for the services availed.

What is the leave encashment while availing LTC?

An employee can avail leave encashment during LTC for a maximum of 10 days and a total of 60 days in their career. However, to avail leave encashment, after availing leave encashment, the leave balance should be a minimum of 30 days. The leave encasements is payable on Basic pay + Dearness Allowance as on commencement of LTC

What is the eligibility criteria for availing of LTC?

  1. Any employee with one year of continuous service on the date of journey performed by him/his family is eligible.
  2. Employees whose spouses are working in Indian Railways/National Airlines are not eligible for LTC.

‘Family’ means:-

i. Wife, husband, parents, unmarried children (two) of the Government Servant wholly dependent* on the employee irrespective of whether they are residing with him/her or not;

ii. Married daughters who are divorced /separated from their husbands and widowed wholly dependent* on the employee.

iii. Unmarried minor brothers, as well as unmarried, divorced, separated from their husbands or widowed sisters residing with and wholly dependent* on the employee providing their parents, are either not alive or themselves wholly dependent on the Govt. Servant.

Dependent: A member of the family whose income from all sources, including stipend, pension, but excluding Dearness Relief does not exceed Rs 3,500/- p.m. is deemed to be wholly dependent.


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