The government has announced a scheme offering tax-free payment of eligible LTC allowance towards goods and services without the need for them to travel.
This benefit will be available until March 31, 2021.
In lieu of one block of the LTC during 2018-21, employees will receive a cash payment, which is tax-free under certain conditions.
The conditions that must be satisfied by an employee to avail the tax-exempt encashment of travel fare amount are as follows:
The employees will not be able to avail the LTC in the 2018-21 year block due to the ongoing Covid-19 pandemic. This is where the LTC will benefit government employees.
This is a one-time scheme and payment will be only in lieu of one LTC during the block of four years 2018-2021.
The leave encashment is also tax-free, provided the amount is spent before March 31, 2021.
It has to be noted that the GST rate on such purchases/services should be 12 per cent or more – typically expenditure on white goods such as refrigerators, washing machines, mobiles, two-wheelers/ four-wheelers other than electric vehicles and most services would fall under this category.