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

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Updated: Oct 29, 2020 8:51 PM

Under the LTC scheme, an amount up to 100 per cent leave encashment and 50 per cent of the value of deemed fare is to be paid in advance to an employee opting for the same.

Leave Travel Concession, LTC, Cash in lieu of LTC, LTC Cash Voucher Scheme, what to buy with Cash in lieu of LTC, GST, LTC advance, auto loan, car loanAs the price of the car is much more than the eligible amount, the entire eligible amount that Kaoushal is entitled for will be utilised.

While searching for a car of his choice to avail the benefit of the LTC Cash Voucher Scheme, Koushal Dey (name changed), a Central Government employee, has spotted a Sports Utility Vehicle (SUV) costing about Rs 40 lakh.

As the price of the car is much more than the amount of cash in lieu of leave travel concession (LTC) that he will get, Koushal will need to take an auto loan to buy the car, provided he gets the amount under the LTC Cash Voucher Scheme in advance.

Under the LTC scheme, an amount up to 100 per cent leave encashment and 50 per cent of the value of deemed fare is to be paid in advance to an employee opting for the same.

However, in case of non-utilisation or under-utilisation of the advance, it is to be accounted for by the Drawing and Disbursing Officers (DDOs) in accordance with the provisions of the LTC advance.

If an employee, after taking LTC advance, spends only the advance amount and makes a claim, it would be treated as under-utilisation. In such a case, after calculation, the balance amount, if any may be recovered from the employee.

It may be noted that, to avail the full benefit under the LTC Cash Voucher Scheme, which is equivalent to deemed fare – based on LTC slab and number of family members – and leave encashment – depending on pay scale – an employee will have to spend three times the deemed fare and the amount of leave encashment.

Q&A on LTC Scheme: Can you make multiple purchases, pay in cash? Here are the answers

As the price of the car is much more than the eligible amount, the entire eligible amount that Kaoushal is entitled for will be utilised.

But does the scheme allow an employee to buy a car by taking the LTC advance and auto loan?

“In order to avail the benefit under the LTC scheme, it is essential that the goods purchased or services availed should attract a GST rate of 12 per cent or above and the payment for the same to be mandatorily made through a digital mode. Since the GST rate on motor vehicles is more than 12 per cent in India, it falls well within the category of eligible goods. As such, one may avail the LTC advance facility under the scheme for making down payment for purchasing a car,” said Dr. Suresh Surana, Founder, RSM India.

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