The scheme is valid for 2018-21. Those availing it should spend three times the payout on buying goods or services taxed at 12% or above. Purchases must be from GST registered suppliers, with payments made digitally and by 31 March
NEW DELHI: The finance ministry has extended the benefit of deemed leave travel concession (LTC), earlier offered to central government employees, to all employees. Mint takes a look at key aspects of the scheme.
The scheme allows tax-free payout of the allowance meant for holiday travel without having to take the trip, given the pandemic situation. The benefit is subject to conditions aimed at encouraging purchase of goods and services at a time the economy badly needs a consumption boost.
Who all are eligible for the benefit?
Employees of central and state governments, public and private sector enterprises and banks are covered under the scheme.
The scheme is applicable for 2018-21. Those availing it should spend three times the payout on purchase of goods or services taxable at the rate 12% or above. This has to be from GST registered suppliers through digital mode and has to be done by 31 March. A voucher showing the GST number of the seller and the amount tax paid on the purchase should be secured by the employee. Central government employees eligible for leave encashment have to spend that amount too for the tax benefit. The payment of LTC cash allowance is capped at ₹36,000 per person.
An important detail to know
If a person spends less than the required amount--three times the LTC cash allowance--the tax exemption and the LTC cash allowance will stand reduced by the proportion of the shortfall in spending. According to the finance ministry, in the case of a person who could spend only 75% of the requirement, the entitlement of LTC cash allowance and the tax break will stand reduced to that extent. Taking advance from the employer and not spending the required amount can land one in a spot. The proportion of unspent LTC cash payout needs to be returned to the employer. Details of the scheme for non-central government employees are awaited. The ministry has broadly said the terms applying to central government employees will be applicable to non-central government employees too. The 12 October communication from the finance ministry in the case of central government employees had said that half of the LTC allowance and full leave encashment amount may be paid as advance but immediate recovery of full advance in the case of non-utilisation and recovery of unutilized portion of the advance with penal interest will be undertaken.
Is the scheme applicable to those in the concessional income tax regime?
The tax-free payout of LTC allowance is not applicable to those who have signed up for the concessional income tax regime under section 115BAC of the Income Tax Act.
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