What is LTC ?
When an employee and their family travel within the country, their employer may be able to claim a tax exemption for the leave travel concession or LTA, that was provided as a component of their salary. An employee may claim the cost of tickets as an exemption from taxes under Section 10(15) of the Income Tax Act if they visit anywhere in India twice in a period of four years.
requirements must employees meet in order to use the LTC Cash Voucher
Employees must meet the following requirements in order to receive the income tax benefits on the LTC:
· The purchase can only be made through digital modes of payment (cash payments are ineligible for deduction)
· The purchase can only be made through GST registered vendors
· The purchase can only be made through digital modes of payment
· The goods and services must have a goods and services tax rate of at least 12%.
· One LTC cash benefit may be used in a single-year block, and purchases must be made before March 31, 2021, as this is the only year block for which the LTC plan benefit is available.
● Can purchase life insurance policies (like a simple term plan) and health insurance policies, and receive reimbursement for the premiums paid, up to the permitted limitations.
of The LTC Cash Voucher Program
● To boost consumer demand in the market, LTC Cash Voucher Scheme was introduced.
● This plan will improve the nation’s economic activity.
● In order to receive benefits under this plan, the employee must spend three times the amount on the travel expenditure voucher.
● This sum must be spent on products and services with a GST of at least 12%.
● For the LTC cash scheme to work, a GST invoice must be issued.
● The staff is obliged to make digital purchases from the GST-registered retailer.
● If employees are buying food-related items, they are not eligible for this scheme’s benefits.
● Employees in both the public and private sectors are eligible for the program’s benefits.
● It will result in more GST being collected.
● The government anticipates that the LTC cash scheme will increase demand in the economy by Rs 1 lakh crore.
● Only families who haven’t had a vacation within the last LTC year block will be eligible for this programme, according to the rules for employees.
● In order to receive the tax exemption amount, employees must spend three times the LTC fare limit.
● For the greatest amount of tax exemption, employees should also spend their 10 days of leave encashment money.
How many LTC claims can be made ?
LTC may be claimed on a maximum of two trips within a specific concession block of four years. One trip may be carried over to the first calendar year of the subsequent block if no LTC was claimed by the individual during the preceding four years. This is referred to as a carryover concession. An employee may submit an LTC claim for personal and family travel expenses.
the central government employee leave travel concession ?
Tax exemptions under LTC are also available to civil servants who work for the central government. All people appointed to the civil services, including those in the armed forces, those working for a State Government while on deputation with the Central Government, those engaged on a contract basis, and those hired again after retiring, must abide by this. This benefit is not extended to or made available to people who are not employed full-time, people who work for a daily wage, people who are paid on the basis of contingencies, people who work for railroads, people who are in the armed forces, and people who are qualified for other types of travel discounts. Before the first planned trip date, a Central Government employee must have at least one year of continuous employment under their belt.
What is a block year for leave travel concessions ?
The LTC benefit is offered to employees for a period of four calendar years. A block year is the collective name for these four years. Employees are allowed to take two domestic excursions in a single block and are eligible for LTC. The person must undertake at least one of these two journeys to their hometown. The employee will not be eligible to submit an LTC claim if they do not meet these requirements. Additionally, a person is only permitted to carry forward one LTC-approved leave to the subsequent block; however, the trip must be taken within the first calendar year of the subsequent block. Employees who have not yet taken advantage of their second trip may do so in the future, but in order to qualify for LTC exemptions, they must travel before the year 2022.
percentage of tax is avoided by choosing LTC ?
People who have not chosen the new income tax system are eligible for tax exemptions on their LTC cash vouchers. With the aid of an illustration, we can comprehend the amount of tax that can be saved. Let’s assume a worker qualifies for the maximum LTC fare of INR 36,000 per person and is the head of a four-person household. He has an LTC of INR 1,44,000 overall. With a marginal tax rate of 42.74%, this person might save paying up to INR 61,556 in taxes. If someone wants to use the new cash voucher programme, they must make sure the products and services they buy have a GST rate of at least 12% and come from a GST-registered vendor.
want to choose the LTC Voucher Scheme ?
This only depends on the annual expenses you have budgeted. Consider if you had in mind to spend this year on a significant buy that would cost three times as much as your LTC. Choosing the LTC voucher option makes sense because you can receive your LTC in cash and avoid paying additional tax on it. On the other hand, it can be better to choose not to participate in the programme if your taxable income is not particularly high and you lack the resources to make a significant purchase that would cost the required amount. You can still use the programme if you have any purchases you’d like to make.