New LTC cash voucher scheme: What private sector employees should know1 min read . Updated: 12 Oct 2020, 02:32 PM IST
- Private sector organisations can review their employee compensation structure to enable their employees to take advantage of the LTC announcements: Tax expert
To boost consumer demand in the coronavirus-hit economy, Finance Minister Nirmala Sitharaman on Monday announced two proposals -- Leave Travel Concession (LTC) Cash Voucher Scheme and Special Festival Advance Scheme. Sitharaman said there are indications that savings of government and organised sector employees have increased.
"We want to incentivise such people to boost demand for the benefit of the less fortunate. We are presenting two proposals -- the Leave Travel Concession (LTC) Cash Voucher Scheme and Special Festival Advance Scheme -- to stimulate consumer spending."
"We expect that private sector would be happy to lap-up the LTC voucher scheme to give it their employees," said Tarun Bajaj, Secretary, Department of Economic Affairs.
Finance Minister said under the LTC Cash Voucher Scheme, government employees can opt to receive cash amounting to leave encashment plus three times ticket fare, to buy items, which attract GST of 12% or more. "Only digital transactions are allowed, GST invoice have to be produced," she said.
"The estimated cost of LTC Cash Voucher Scheme for central government is ₹5,675 crore for PSBs and for PSUs it is ₹1,900 crore. The tax concessions for LTC tickets are available for state government and private sector too, if they choose to give such facility, these employees too can benefit," she said.
Alok Agrawal, Partner, Deloitte Haskins & Sells LLP, said: “Private sector organisations can review their employee compensation structure to enable their employees to take advantage of the announcements, eg where there is an LTA component as part of the flexi-components in the CTC basket. Of course, this is subject to how the relevant Income tax rules are amended."
The Special Festival Advance Scheme for government employees is being revived as a one-time measure, for gazetted employees too, the Finance Minister said.
"All the central government employees can now get interest-free advance of ₹10,000, in the form of a prepaid RuPay Card, to be spent by March 31, 2021," she said.
The interest free advance of ₹10,000 under the Special Festival Advance Scheme to be paid back in 10 installments.