How central government employees can avail benefit under LTC cash voucher plan

As part of a incentive package to boost consumption in an economy hit hard by the Covid-19 pandemic, the government announced an LTC cash voucher scheme for its employees. By opting for this scheme, government employees can purchase goods and services in lieu of the tax-exempt portion of the Leave Travel Concession/Leave Travel Allowance (LTA/LTC). He/she can claim tax-exemption on the travel fare encashed if the amount is spent by satisfying specified conditions.

The plan is also available for private sector employees, state government employees, public sector units and public sector banks employees, provided they follow the guidelines of the plan.

Saraswathi Kasturirangan, Partner, Deloitte India says, "Since the notification is effectful from the date of issue, to be eligible for the scheme, purchases need to made prospectively between October 12, 2020, and March 31, 2020. However, the memorandum does not clarify whether these purchases can be broken into little bills or has to be a single bill or whether the invoices has to be in the name of the employee or whether bills in the names of family members be eligible under the plan are acceptable.”

To opt for the plan, a central government employee must satisfy the following conditions:

a) The employee spends the money of a larger sum than the entitlement on account of LTC on actual expenditure.

b) Cash equivalent of full leave encashment will be allowed hand over the employee spends an equal sum. This will be counted towards the number of leave encashment on LTC available to an employee.

c) The cash equivalent may be allowed if the employee spends a sum three times of the value of the fare.