With a view to compensate and incentivise consumption by employees, it has been decided that cash equivalent of LTC may be paid by way of reimbursement.
Last week, Income Tax Department extended the I-T exemption available under the LTC cash voucher scheme to employees of private sector.
Under the LTC Cash Voucher Scheme, the Government has decided to give cash payment to employees in lieu of one LTC during 2018-21. The employees will be given full payment on Leave encashment and tax-free payment of LTC fare in 3 flat-rate slabs depending on the class of entitlement. The LTC Cash Voucher Scheme Circular for the central government employees has been released and the private sector employers can now devise their own structure based on the guidelines provided.
In view of Covid-19 pandemic and resultant nationwide lockdown as well as disruption of transport and hospitality sector, as also the need for observing social distancing, a number of employees are not in a position to avail themselves of LTC for travel to any place in India or their Hometowns in the current Block of 2018-21.
With a view to compensate and incentivise consumption by employees thereby giving a boost to consumption expenditure, it has been decided that cash equivalent of LTC, comprising Leave Encashment and LTC fare of the entitled LTC may be paid by way of reimbursement.
1. What is the scheme about
The biggest incentive for central government employees to avail the LTC Cash Voucher Scheme is that in a four-year block ending in 2021, the LTC not availed will lapse, instead, this will encourage employees to avail of this facility. An employee, opting for this scheme, will be required to buy goods or services worth 3 times the fare and 1 time the leave encashment before 31st March 2021. The items bought should be those attracting GST of 12% or more. Only digital transactions are allowed, GST Invoice to be produced.
2. What do employees get
Central Government employees get LTC in a block of 4 years in which air or rail fare, as per pay scale/entitlement which gets reimbursed and in addition, Leave encashment of 10 days (pay + DA) is paid. But due to COVID-19, employees are not in a position to avail of LTC in the current block of 2018-21.
Therefore, the Government has decided to give cash payment in lieu of one LTC during 2018-21, in which:
Full payment on Leave encashment and
Payment of fare in 3 flat-rate slabs depending on class of entitlement
Fare payment will be tax-free
3. Who all can avail
The employees of Public Sector Banks (PSBs) and Public Sector Undertakings (PSUs) will also be allowed this facility. The tax concessions for LTC tickets available for state govt. and private sector too, if they choose to give such facility, will be available to the employees, subject to the guidelines of the Central Government scheme.
4. Conditions to be met
If an employee opts for this in lieu of one LTC in the Block of 2018-21, it will be subject to the following conditions:
a) The employee spends the money of a larger sum than the entitlement on account of LTC on actual expenditure.
b) Cash equivalent of full leave encashment will be allowed, provided the employee spends an equal sum. This will be counted towards the number of leave encashment on LTC available to an employee.
5. How much cash equivalent admissible
The amount both on account of leave encashment and fare shall be admissible if the employee spends
(i) an amount equal to the value of leave encashment and;
(ii) an amount 3 times of the cash equivalent of deemed fare,
The admissible payment shall be restricted to the full value of the package (leave encashment as admissible for LTC and deemed fare) or depending upon the spending.
6. Where to spend
The spending need to be on the purchase of such items / availing of such services which carry a GST rate of not less than 12% from GST registered vendors / service providers through digital mode and obtains a voucher indicating the GST number and the amount of GST paid.
7. Will there be TDS
While TDS is applicable in the case of leave encashment, since the cash reimbursement of LTC fare is in lieu of deemed actual travel, the same shall be allowed exemption on the lines of existing income-tax exemption available to LTC fare. The legislative amendment to the provisions of the Income-Tax Act, 1961 for this purpose shall be proposed in the due course. Hence, TDS shall not be required to be deducted on the reimbursement of deemed LTC fare.
8. Will employees get advance
An amount upto 100% of leave encashment and 50% of the value of deemed fare may be paid as advance into the bank account of the employee which shall be settled based on production of receipts towards purchase and availing of goods and services. The claims under this package (with or without advance) are to be made and settled within the current financial year.
9. Non-utilization / under-utilization of advance
Non-utilization / under-utilization of advance is to be accounted for by the employer in accordance with the extant provisions relating to LTC advance i.e. immediate recovery of full advance in the case of non-utilisation and recovery of unutilized portion of the advance with penal interest.
10. When will reimbursement happen
Head of the Departments / DDOs may make reimbursement under this package on receipt of invoices of purchases made / services availed during the period post the issuance of this order from the employees who are desirous to avail this package. It may be noted that in order to avail this package an employee should opt for both leave encashment and LTC fare.