LTC cash voucher scheme for Central Government Employees Explained

Published on / By M. Pattabiraman Twitter: @pattufreefincal

Published: October 21, 2020 at 5:29 pm

Last Updated on October 21, 2020 at 5:29 pm

The Government launched an LTC (Leave Travel Concession) Cash Voucher Scheme for Central Government employees on 12th October 2020 to enable employees to purchase goods and services instead of availing LTC & leave encashment. This is a reimbursement scheme for LTC expense to revive the economy. Details and FAQ about the scheme are presented.

About the author: Anjesh Bharatiya is a 30+ taxman by profession and a Chemical Engineer by education. He has been an investor in the stock market since age 15! He likes to write about personal finance, stock markets, government policies, taxation, philosophy and football. Also by Anjesh: (1) Want to trade in stocks? Here is how your income will be taxed. (2) How to use Tax benefits on HRA and home loans (3) How to get tax benefits under a Hindu Undivided Family (HUF).

This scheme has been formulated as a way to enable employees to still get benefits even though travelling for LTC may not be possible in the present COVID pandemic situation. The Government also wants to boost consumption expenditure by employees ahead of the festive season.

The normal LTC scheme allows a Government servant to visit any place in India and hometown once each in a block of 04 years. The current block period is calendar years 2018-2021. Along with the LTC, the employee can also claim leave encashment for up to 10 days of Earned Leave accrued to him payable on his Basic Pay+ Dearness Allowance (DA).

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What are the conditions for LTC cash voucher scheme? The central govt employee will be reimbursed cash equivalent of LTC fare and leave encashment subject to the following conditions:

  • The employee needs to spend an amount equal to the leave encashment component and an amount 3 times the deemed LTC fare for purchase of items or services.
  • The purchased items or services should carry a GST rate of at least 12%.
  • The purchase should be made from GST registered vendors/service providers with payment being made through digital mode only.
  • To make the claim, the employee needs to obtain a voucher/bill indicating the vendor’s GST number and the amount of GST paid.

The deemed LTC fare (per person per round trip) has been fixed based on employee’s travel mode eligibility in three slabs of Rs 6000, 20000 and 36000. As per 7th Central Pay Commission’s pay matrix for Government employees, these slabs correspond to pay level 1 to 8, level 9 to 13 and level 14 & above respectively.

 

Examples

  1. For availing full cash benefit, an employee having a family of two and the basic bay of Rs 56900 in Level 7 in the pay matrix and DA 17% has to spend as under:

Leave encashment component for 10 days leave encashed: (56900 + 17% of 56900) *10/30 = Rs 22191

Three times the deemed LTC fare for two persons= 3*(6000*2) = Rs 36000

Total amount to be spent = Rs 22191 + Rs 36000 = Rs 58191

  1. In case the employee spends three times the fare amount only i.e. Rs 36000, the amount payable to him will be calculated as under:

Calculation of % of leave encashment to the total amount to be spent = (22191/58191) *100 = 38%

Calculation of % of fare amount to the total amount to be spent = (12000/58191) *100 = 20%

Proportionate amount payable: 3 times of deemed fare * % of leave encashment = 36000 *38% = Rs 13680

Proportionate amount payable: 3 times of deemed fare * % of fare amount = 36000 *20% = Rs 7200

Total amount payable = Rs 13680 + Rs 7200 = Rs 20880

LTC cash voucher scheme list of features

  • The scheme is optional but can be availed only when both leave encashment and LTC fare are opted for. However, for employees who have already exhausted the prescribed limit of leave encashment for LTC, this scheme can be availed by utilizing the applicable LTC fare without leave encashment.
  • The cash reimbursement is eligible for existing tax exemptions available on LTC fare (Actual LTC fare for travel is tax-exempt). No TDS will be deducted on the reimbursement.
  • An amount up to 100% of leave encashment and 50% of the value of deemed fare can be claimed as advance from the employer.
  • The claims under this scheme have to be made and settled before 31st March 2021. Therefore, the bills/vouchers for claiming this benefit should be dated between 12.10.2020 and 31.03.2021 and should be in the name of the employee only.
  • Any unutilized/ under-utilized advance will be fully recovered with penal interest.
  • In case the LTC has been partially availed already in the current block period (e.g. travel of only a few family members to hometown), only the unutilized portion of the LTC fare is eligible for this scheme. Also, if the LTC fare of any member of the family has not been utilized for this purpose, those members can avail the normal LTC.
  • Newly joined Government employees are entitled for three Home Town and one Anywhere in India in a Block of four years. Such an employee may use any one of the four LTCs available in a Block Year for this scheme.
  • Purchase of eligible goods & services can be made through multiple bills, including from e-commerce sites.
  • The scheme can be availed by submitting a simple application.

References:

LTC Cash Voucher Scheme Circular

LTC Cash Voucher Scheme FAQ