29 Oct, 2020 11:11p.m.

LTC cash scheme extended to State Govt, Banks and Private staff

ltc-cash-scheme-extended-to-state-govt-banks-and-private-staff

The Government have extended the benefits of LTC cash voucher scheme to non-central government employees. The employees of state governments, state-owned enterprises and the private sector will now be eligible to avail LTC cash voucher scheme.  

The finance ministry earlier had issued an OM for the LTC cash voucher scheme for the central government employees. Now, this is extended to employees from the other sectors also.

Under LTC Cash Voucher Scheme, govt. employees can opt to receive cash amounting to leave encashment + 3 times ticket fare, to buy something - items which attract GST of 12% or more. However, employees can spend LTC cash voucher only through digital mode and at places registered under GST before 31 March 2021.

Basically, this is meant for utilising the LTC fare amount for other market consumption which will help in economic revival. This will benefit the employees, given that the travel under the LTC scheme is not preferred due to the COVID 19 pandemic and other restrictions.

An employee who spends less than three times of the deemed LTC fare on specified expenditure during the specified period shall not be entitled to receive the full amount of deemed LTC fare and the related income-tax exemption and the amount of both shall be reduced proportionately

The government has fixed a cap of Rs 36,000 per person as the deemed LTC fare per person (round trip) to non-central government employees. This cap will be considered as the limit for the allowed income-tax exemption.

The fresh stimulus measure would allow non-government employees as well to claim tax-free cash allowance from their employers if an LTC scheme similar to one in the government sector is included in their working contract.

In an official statement, the government said: "In order to provide the benefits to other employees (i.e. non-central government employees) who are not covered by the above mentioned OM (the October 12 decision for central government employees) it has been decided to provide a similar income-tax exemption for the payment of cash equivalent of LTC fare to the non-central government employees also."

The scheme is offered as a stimulus package to boost middle-class consumption and thereby contributing to the revival of the economy.

Those who have exercised an option to pay income tax under the concessional tax regime or new tax regime, won't be eligible for the scheme as this exemption is in lieu of the exemption provided for LTC fare.

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