How much and where you should spend to benefit from LTC cash voucher scheme for private sector – Explained

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Updated: Oct 30, 2020 10:33 AM

Employees who have opted for the simplified tax regime will not be able to take the benefit of the exemption

ltc cash voucher schemeLTC scheme: Private sector employee needs to spend three times the value of the deemed LTC fare in goods or services that attract a GST of 12 per cent or more through a digital mode before March 31, 2021. Representational image

The Central government has now extended the Income Tax benefit on LTC Cash Voucher scheme to the non-Central Government Employees, which includes private sector workers as well. This comes as a good news for private sector employees ahead of Diwali. However, to enjoy the benefit of the scheme, the private sector employees need to be aware of a few terms and conditions of the scheme.

Earlier in her presentation for the announcement of the LTC cash voucher scheme, Finance Minister Nirmala Sitharaman had indicated that the benefit would be extended to private-sector employees as well. However, the government’s official notification mentioned benefits for Central Government Emmployees only. Now, the government has clarified that the benefit would be extended to privte sector employees as well.

Commenting on the announcement of the Finance Ministry, Aarti Raote, Partner, Deloitte, said that the clarification provides the exemption for private sector employees who are eligible to claim the Leave travel allowance.

What is the condition?

Aarti Raote said that the employee needs to spend three times the value of the deemed LTC fare in goods or services that attract a GST of 12 per cent or more through a digital mode before March 31, 2021.

No benefit for the new tax regime

“Unfortunately employees who have opted for the simplified tax regime will not be able to take the benefit of the exemption,” she said while adding, “This is a welcome step by the government given the festive season is just round the corner. ”

Saraswathi Kasturirangan, Partner, Deloitte, said that the the maximum deemed LTC fare per person is Rs. 36,000, which would entail a maximum deduction of Rs. 144,000 for a person with a family of four.

Benefit only on online/digital purchase

To avail the tax benefit, the employee will have to spend three times the eligible amount on the purchase of goods/services which carry a GST rate of not less than 12% from GST registered vendors/service providers through digital mode, according to Saraswathi Kasturirangan.

This expenditure can be incurred between 12th of October, 2020 to 31st of March, 2021.

Employees will have to submit suitable GST voucher to claim the benefit.

What can you buy?

To claim the benefit, private sector employees can spend on items like refrigerators, washing machines, mobiles, two wheelers/ four wheelers other than electric vehicles.

Divya Baweja, Partner, Deloitte said that the amount of exemption shall be proportionately reduced in case the amount spent towards specified purchase is less than 3 times the deemed LTC Fare.

“The employee should exercise the option for the deemed LTC fare in lieu of the applicable LTC in the block of 2018-21. Further he/she should spend a sum equal to three times of the value of the deemed LTC fare on purchase of goods / services having a GST rate of not less than 12% from GST registered vendors / service providers through digital mode during the period from the 12th of October, 2020 to 31st of March, 2021 and obtain a voucher indicating the GST number and the amount of GST paid,” said Baweja.

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