Leave Travel Concession vs LTC Cash Voucher Scheme: Which is more beneficial?

By: |
February 19, 2021 7:52 PM

Under the LTC Cash Voucher Scheme, employees are allowed to purchase goods and avail services that attract GST rate of 12 per cent or more in lieu of travel.

Leave Travel Concession, LTC, LTC Cash Voucher Scheme, Covid-19 pandemic, nationwide lockdown, tax-free incentive, goods, services, GST, tax benefit, travel fare, Leave EncashmentTo avail the benefit, the employees have to either travel or spend on goods and/or services till March 31, 2021.

To help the employees, who were unable to travel due to the Covid-19 pandemic, claim the Leave Travel Concession (LTC) and to boost the demand, that got crippled due to the nationwide lockdown, the government has launched the LTC Cash Voucher Scheme.

Under the LTC Scheme, employees are allowed to purchase goods and avail services that attract GST (Goods and Services Tax) rate of 12 per cent or more in lieu of travel in the current Block of 2018-21.

To avail the benefit, the employees have to either travel or spend on goods and/or services till March 31, 2021.

If an employee chooses to travel, he/she will get the permitted travel expenses reimbursed. For government employees, it’s an additional tax-free incentive, while for private sector employees, it’s mostly claiming the part of CTC tax free.

On the other hand, to avail benefits under the LTC Cash Voucher Scheme, an employee has to spend three times the travel fare of the family as per the permitted slab as well as the amount of leave encashment to get benefit on the amount of travel fare and leave encashment. Again, for government employees, it’s an additional tax-free incentive, while for private sector employees, it’s mostly claiming tax benefit on the permitted amount.

LTC Scheme: Can you take LTC advance, auto loan to buy a car?

The slab per family member for an employee entitled for air travel in business class is Rs 36,000, for those entitled for air travel in economy class is Rs 20,000, while for employees entitled for rail travel is Rs 6,000.

Following are the comparison of the benefits under the two options:

Leave Travel Concession (LTC)

  • Under LTC, only the travel fare of the shortest route in permitted mode and class of an employee and his/her family is reimbursed.
  • To avail the benefit, the employee has to take leave for the journey period.
  • The employee may claim Leave Encashment (if available) for the travel period, but it will be taxable.
  • Even if income of a government employee is not taxable, he/she may get the travel expenses reimbursed under LTC. However, for most private sector employees having non taxable salary, travel is immaterial as LTC is part of their CTC.

LTC Cash Voucher Scheme (LTC Scheme)

  • Benefit is available only on spending on goods and services that attract GST of 12 per cent or more.
  • Payment has to be made in any mode other than cash.
  • To get the benefit, spending has to be 3 times.
  • No need to take leave to avail the benefit.
  • Where leave encashment is available, it will also be tax free.
  • For most private sector employees having non taxable income, there will be no benefit under the LTC Scheme as only tax exemption is provided on the permitted amount.

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