The Finance Minister recently announced a Leave Travel Concession (LTC) cash voucher scheme and a Rs. 10,000 festival advance for govt. employees. Here are some key things to note about the scheme.
The havoc that the pandemic has wreaked on the economy not just involves widespread job loss but it has also led to a sharp fall in demand and a collapse in investment. So much so, that the economy contracted by a record 23.9% during April-June 2020. In such trying times, to boost demand and spending in the economy, the govt. recently announced an LTC cash voucher scheme and a festival advance of Rs. 10,000 for all govt. and private-sector employees. Here are the key things to note about the scheme:
LTC Cash Voucher Scheme
In this scheme, the govt. will give its employees income-tax exempt cash vouchers in place of their entitled leave allowances this year. This cash has to be spent on buying goods that attract 12% or more GST. This eliminates the possibility of spending the cash on food items. Central public-sector enterprises as well as banks will follow suit and extend this benefit to their employees as travelling during the pandemic is nearly impossible.
Moreover, as a one-time measure, the govt. will also give a Rs. 10,000 salary loan to all its employees as a festival advance.
Additional Reading: REVEALED: Apple’s iPhone 12 Series
How Will It Work?
Central govt. employees get LTC in a block of four years (one to anywhere in India and one to their hometown, or two for their hometown). They receive reimbursement for the air or rail fare as per scale/entitlement as well as leave encashment of 10 days (pay plus DA). Since employees will not be able to travel and avail LTC this year owing to COVID-19, the govt. will pay employees cash – full payment on leave encashment and payment of fare in three flat-rate slabs depending on the class of entitlement. This payment will be tax-free.
If you’re a central govt. employee and decide to opt for this scheme, you will need to spend an amount equivalent to three times the LTC fare and one time the leave encashed before 31st March, 2021. The money needs to be spent buying goods that attract GST of 12% or more from a GST-registered vendor and through digital mode only. The invoice indicating the GST number of the vendor as well as GST paid will have to be produced when claiming the benefit.
Employees will need to avail the Rs. 10,000 worth of festival advance again by 31st March, 2020 and to this end, will get a pre-loaded Rupay card of the advance value. Note that the advance cannot be withdrawn as cash. The govt. will bear the bank charges for loading the card.
Additional Reading: Double-Income To Single-Income Household – How To Ensure A Smooth Transition
Will TDS apply considering TDS is normally applicable on leave encashment? As the cash reimbursement of LTC fare is being done in place of actual travel, it will be exempted from tax as per the existing income-tax exemption available to LTC fare. Therefore, reimbursement of the deemed LTC fare will not have TDS deducted.
Policy For Private-Sector Employees
While the scheme has been announced for central-government employees, companies could evaluate their Leave Travel guidelines and concessions and amend them as per the stipulations of the LTC Cash Voucher scheme in order to roll out the benefit to their employees too.
Shopping for festive season? Get a cashback Credit Card that gives you loads of cashback and maximum savings on your festive spends. Apply from the comfort of your home via a 100% online, contactless KYC process.