LTC CASH VOUCHER SCHEME FOR PRIVATE SECTOR

 

The LTC cash voucher scheme is a welcome move by Government especially for the private sector as it not only provides tax benefit to employees, but also increases the consumer consumption. Because of the Covid -19 Pandemic, there was a huge impact on the consumer demand and its consumption and hence this scheme hopefully will boost the consumption as it gives more cash in the hands of the employees.

 

Due to the Covid 19 Pandemic as the employees travel plans was disrupted, which means many were unable to claim their LTA. In view of this, on 29th October, 2020, this scheme of LTC Cash Voucher was extended to Private sector employees. In case of Private sector employees, the LTA eligibility is a part of their compensation and is being claimed by employees to avail tax benefit.

 

To avail this benefit private sector employees, need to fulfill the following conditions;

 

1.        Employees to spend three times the amount of deemed LTC fare on the purchase of goods/services which are having a GST rate of 12% or above.

2.        The maximum amount allowed will be to the extent of 3 times their LTA eligibility. The eligibility limit per person for claiming this benefit is Rs.36,000/-.

3.        The family members should consist of Spouse, children, Parents and dependent brothers and sisters

4.        The amount must be spent during the period from 12th October 2020 to 31st March 2021.

5.        The payments made towards purchase of such goods / services must be made through online mode which includes cheque, UPI, Debit/credit card or net banking etc.

6.        Employees are required to submit the copy of the invoices to the employer which should contain GST Number of the Vendor and GST amount.

7.        Employee should not have opted under new tax regime u/s 115BAC.

 

In case if the amount spent is less than the 3 times of the LTA eligibility, then the exemption will be allowed proportionately. If an employee chooses not to avail this scheme, can be able to claim the LTA carry over benefit in the next financial year in addition to the eligibility for next block. The current LTA block period ends 31st Dec 2021.

 

Below examples gives you an idea on how the exemption is computed;

 

Example1

Example 2

 

 

 

 

FAQ on LTC Cash Voucher Scheme;

 

1.     Is this scheme applicable only for one time purchase of Goods and Services?

Ans. Under this LTC Scheme, employees can avail products / services which are one time purchases or even of recurring in nature. Which means even if the employees have purchases or availed services in different period with multiple invoices can be allowed.

 

2.     Whether such invoices / bills should be in the name of Employee or any other family member? Ans. The invoices of such purchases / services can be in any of the family member or dependent. As per the LTA rule, the family or dependents covers Spouse, Children, Parents and dependent brothers and sisters.

 

3.     Is there any limit on number of dependents to claim under this Scheme?

Ans. The Scheme specifies only a cap of Rs. 36,000/- per member and there is no cap on number of dependent members. Hence, the actual claim allowed depends on the declaration submitted by the employees with details of members and their relationship can be allowed.

 

4.     Is it mandatory to submit original bills, as I have purchased electronic items I need to preserve the invoices claiming warranty in case of any product issues?

Ans. Employees need to submit the original invoice. However, in case if the original is required to be kept by the employee, a photocopy of the same can be submitted with self-attestation.

 

5.     I am availing services from a professional, but the invoice I have received does not have any GST as the professional is not covered under GST, can I still claim such expenses under LTIC? Ans. If any purchase / service invoice does not contain GST which is either 12% or more, then such expenses can't be claimed under this scheme.

 

6.     Whether the limit of Rs.36,000/- per person includes GST? Ans. Yes. The limit specified is including GST.

7.     If I claim this LTC, will my LTA claim eligibility which is twice in a block of 4 years will lapsed?

Ans. Such LTC Claim will be considered as one of the claim during the current block of from Jan 2018 to Dec 2021.

 

8.     Post lock down, I had travelled to my native, can I claim both travel expenses and also other expenses as per the new LTC Scheme?

Ans. No. The new LTC scheme is a deemed Leave travel claim and is introduced only in case of the employee is unable to claim due to Covid 19. In case if you have travelled along with the family members, you can only claim LTA by submitting your travel ticket documents and will not be able to claim the expenses as per the new LTC Scheme.

 

9.     I had purchased Mobile handset for my school daughter online class in the month of July 2020 during lockdown, can I claim under this scheme?

Ans. No. Only purchases made from 12th October 2020 to 31st March 2021 is allowed for claiming this benefit.

 

10.  I have opted for new Tax regime; can I claim this benefit?

Ans. The LTC Scheme is available only for those who have opted for old tax regime.

 

11.  If payments made to Insurance can be allowed under this scheme?

Ans. GST rate for insurance payments differs based on the Life insurance plan taken. GST of 18% is charged on term policies, which are the cheapest form of insurance as they only carry the mortality cost. In the case of traditional policies, which bundle insurance and investment, GST is levied at 4.5% on the first-year premium and 2.25% on premiums for subsequent years. As the deemed LTC scheme, covers only the payments made for expenses with GST 12% and above, only few types of insurance schemes are allowed to be claimed. Traditional policies may not be claimed under this scheme. However, Vehicle Insurances with GST of 18% can be claimed under this scheme.

 

12.  I had paid towards the Insurance which has 12% and above GST %, can I claim under the new LTC Scheme.

Ans. Yes. You can claim such Insurance under the new LTC Scheme. However please note that if you have claimed such Insurance under as deduction under chapter VIA towards insurance premium, then it can’t be claimed under this new scheme.

 

13.  I am planning to purchase some of the items which are allowed under the new LTC Scheme sometime during last week of March 21. However, my employer is asking us to submit the LTC Claim on or before 5th March 21. Can I claim this while filing my tax return?

Ans. Yes. If any expenses incurred on or before 31st March 21 which is not being claimed through employer, you can claim this exemption while filing your tax return.