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Home >News >India >Not compulsory for employees to take at least 20 days of earned leave in a year, clarifies govt
Union Finance Minister Nirmala Sitharaman  (PTI)
Union Finance Minister Nirmala Sitharaman (PTI)

Not compulsory for employees to take at least 20 days of earned leave in a year, clarifies govt

  • In Oct 2020, FM Sitharaman announced a 73,000-cr package, including advance payment of a part of wages to central govt employees and cash in lieu of LTC
  • The package was to stimulate consumer demand and investment in the economy damaged by the coronavirus pandemic

New Delhi: Central government on Wednesday quashed a media report suggesting it has made it compulsory for its permanent employees to take at least 20 days of earned leave every year.

"It is being claimed that the government has made it compulsory for its permanent employees to take at least 20 days of earned leave every year, instead of hoarding them up for encashment," government clarified.

In October 2020, Finance Minister Nirmala Sitharaman announced a 73,000 crore package, including advance payment of a part of wages to central government employees and cash in lieu of LTC, to stimulate consumer demand and investment in the economy damaged by the coronavirus pandemic.

As much as 11,575 crore would be paid as LTC allowance and advance to central government and PSU employees on the condition that they spend on non-essential goods before March 31, she said.

At a news conference, she said the government will give its employees income tax-exempt cash vouchers in lieu of their entitled travel allowances this year.

This cash will have to be spent on buying goods that attract 12 per cent or more GST -- a condition which eliminates the possibility of the cash being spent on essential items.

Central public sector enterprises and banks will also follow the cue and give cash in place of leave travel concession (LTC) as travelling during the pandemic is near to impossible.

Additionally, the government will as a one-time measure give 10,000 salary loan to all its officers and employees as festival advance.

These two measures are "expected to create a consumer demand of about 28,000 crore", she said.

Together with the loan to states and additional capital spending, Sitharaman said "very rough estimate is that potential private-sector spending through LTC tax benefit will be at least equal to the government employee-led demand of 28,000 crore and the total additional demand estimated to exceed 1 lakh crore."

Sitharaman said the central government employees get LTC in a block of four years (one to anywhere in India and one to hometown; or two for the hometown). Air or rail fare, as per scale/entitlement, is reimbursed and in addition, leave encashment of 10 days (pay plus dearness allowance) is paid.

Due to COVID-19, employees are not in a position to avail LTC.

In lieu of one LTC, a cash payment will be made -- full payment on leave encashment and payment of a fare in three flat-rate slabs depending on the class of entitlement. Fare payment will be tax-free.

An employee opting for this scheme will be required to buy goods/services worth three-times the fare and one-time the leave encashment before March 31, 2021, she said, adding money must be spent on goods attracting GST of 12 per cent or more from a GST-registered vendor and through digital mode.

If central government employees opt for it, the cost will be around 5,675 crore. Employees of public sector banks and PSUs will also be allowed this facility and estimated cost for them will be 1,900 crore.

The tax concession will be allowed for state government/private sector too, for employees who currently are entitled to LTC, subject to following the guidelines of the central government scheme.

Demand infusion in the economy by the central government and central PSE/PSB employees is estimated to be 19,000 crore. Demand infusion by state government employees will be 9,000 crore.

She said festival advance along with other similar advances were abolished on the recommendations of the 7th Pay Commission.

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