By Amarpal S Chadha
The Covid-19 pandemic has been distinctive and unprecedented. It brings multi-fold challenges in the social and financial lives of folks. To address the financial predicament, the government has supplied several relaxations to the men and women such as extension of several due dates of compliances, the introduction of loan moratorium, relaxation of residency guidelines, and so forth.
Under the Income-tax Act, 1961, two round trip journeys in a block of 4 calendar years are eligible for tax advantages as Leave Travel Concession/ Allowance (LTC/ LTA). Since staff are unable to travel in the existing year falling in the block of 2018-21, the government has taken cognizance of this reality and appropriately rolled out Leave Travel Concession Cash Voucher Scheme (the Scheme) for central government and non-central government staff, which includes the private sector.
LTC money voucher scheme
The scheme is really revolutionary, socially and economically engineered to balance the demands of the economy and taxpayers. An essential aspect of the general scheme is that even if you do not travel, you are eligible to obtain your LTC/ LTA eligibility as tax-free of charge allowance topic to fulfilment of particular circumstances. Under the scheme, if an employee spends 3 instances of eligible LTC/ LTA, he would be eligible to obtain LTC/ LTA equivalent, without the need of levy of any earnings tax. However, the commit has to be towards the obtain of goods or solutions, which attract GST price of 12% or much more and the payment has to be through digital mode only. The invoice must bear the name of the employee or household members eligible for LTC/ LTA. The commit demands to be accomplished in the window of October 12, 2020 to March 31, 2021.
To illustrate, Richa, employed with a top IT business, could not travel due to the pandemic. She has a household of 4 members and has opted for LTC entitlement of Rs 80,000. If she spends 3 instances (i.e., Rs 2,40,000) on obtain of goods such as tv, air conditioner, mobile, fridge, and so forth., she would be eligible to obtain Rs 80,000 as allowance without the need of any taxes. Since she falls in the maximum marginal tax price of 42.74% she would save taxes of about Rs 34,000. Had she not availed the scheme, she would have ended up paying Rs 34,000 as taxes on receipt of LTA of Rs 80,000, in spite of spending on white goods and eligible solutions.
Not for new tax regime
The scheme would not be obtainable for staff who have availed new concessional private tax regime, which delivers lowered tax prices in lieu of forgoing main exemptions and deductions.
To implement the scheme for the private sector, employers require to set up a method to confirm the invoices submitted by the staff to assure all the circumstances are getting happy (GST price, digital payment, name of employee, eligible period of invoice, and so forth.). Moreover, whether or not unclaimed LTA advantages could be carried forward to subsequent year or will it lapse, demands clarity from the government.
The scheme could be a game-changer and is anticipated to stimulate general consumption in the existing fiscal year, along with enhanced GST collection. It is also a win-win for taxpayers who can save taxes on the LTA quantity and obtain lengthy cherished products. So, whether or not you travel or not, avail the advantages of LTC Cash Voucher Scheme.