Initially, the scheme was announced for central government employees, however, later via a press release, the scheme was extended to private sector, PSU and state government employees.
As per the memorandum, “Under the existing provisions of the Act, clause (5) of section 10 of the Act provides for exemption in respect of the value of travel concession or assistance received by or due to an employee from his employer or former employer for himself and his family, in connection with his proceeding on leave to any place in India. In view of the situation arising out of outbreak of COVID pandemic, it is proposed to provide tax exemption to cash allowance in lieu of LTC. Hence, it is proposed to insert second proviso in clause 5 of section 10, so as to provide that, for the assessment year beginning on the 1st day of April, 2021, the value in lieu of any travel concession or assistance received by, or due to, an individual shall also be exempt under this clause subject to fulfilment of conditions to be prescribed. It is also proposed to clarify by way of an Explanation that where an individual claims and is allowed exemption under the second proviso in connection with prescribed expenditure, no exemption shall be allowed under this clause in respect of same prescribed expenditure to any other individual.”
To claim the benefit under the scheme, an individual is required to fulfil the following conditions:
i) Spend three times the amount of deemed LTC fare on the purchase of goods/services attracting GST of 12% or more;
ii) Purchases must be made during the period between October 12, 2020 and March 31, 2021.
iii) Payment for the purchases must be made through a digital mode including cheque, UPI, etc.
iv) Invoices must be furnished to an employer containing details of the vendor, GST number and GST amount paid. Invoices in the name of family members can also be submitted.
A private sector employee can claim maximum tax exemption of Rs 36,000 per person. Thus, a family of four can claim tax exemption of Rs 1.44 lakh.
Do keep in mind that the benefit of the LTC Cash Voucher scheme is available in the old tax regime. If an individual opts for the new tax regime, then tax benefit under the scheme will not be available.
