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LTC Cash Voucher Scheme

author portrait

Divya Singhvi

Cash voucher scheme
Income from salary
Income Tax
LTC
Last updated on July 24th, 2021

Finance minister, Nirmala Sitharaman, made an announcement on October 12, 2020 of LTC cash voucher scheme for the central government employees. The Income Tax Department, via a press release issued on October 29, 2020, then extended the benefits of the LTC Cash Voucher Scheme to non-central government employees as well, i.e., those employed in the private sector, public sector units, and the state government. The Leave Travel Concession (LTC) cash Voucher scheme was notified by the government in Budget 2021.

Objective of LTC Cash Voucher Scheme

This scheme was announced to boost consumer demand and to provide tax benefit to individuals who are unable to claim the usual LTC tax benefit due to Covid-related travel restrictions. The LTC Cash Voucher scheme aims to provide other expenditure options to the employees to avail the benefits. It would definitely entail tax savings to the individuals who are getting LTA or LTC from their respective employers. The employees have the option to receive a cash equivalent benefit of LTC fare and related leave encashment without traveling under the LTC scheme.

Who are Eligible?

The LTC cash voucher scheme will be available for central government and PSU employees. However, the finance minister extended this scheme to non-central government employees as well, i.e., those employed in the private sector, public sector units, and the state government.

Conditions to claim benefit under the Scheme

To claim the benefit under the LTC cash voucher scheme, an individual is required to fulfil the following conditions:

You will be able to claim the benefits under the scheme only if you fulfill all the above mentioned conditions.

Deemed LTC Fare

The deemed LTC fare for this purpose is as follows:

For example: A maximum tax benefit of LTC fare is INR 36,000 is available per person in case of business class air travel. Thus, for a family of four, the maximum tax benefit that can be claimed is INR 1.44 lakh. Further, to claim the maximum tax benefit, an individual taxpayer will be required to spend INR 4.32 lakh (INR 36,000 X 4 X 3).

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How Does LTC Cash Voucher Scheme Work?

The cash voucher scheme is in lieu of the LTC benefit. So, before you go on to file the claim you should know that this would only apply to you in the following circumstances:

Should you opt for it?

This scheme is totally optional and the employees can either choose avail the scheme or opt for the regular LTC in the subsequent years in the block. The benefit is only to the extent of reimbursement in cash of the maximum amount of LTC eligible to them. Those employees who were not planning to avail or have not been able to avail of the the LTC owing to current situation due to Covid-19, have an opportunity to claim LTC cash voucher scheme.

Tax Benefits of LTC Cash Voucher Scheme

Besides getting the reimbursement of purchases, the employees also benefit from LTC scheme in terms of tax savings. Although TDS is applicable on leave encashment, but amount which is related to the cash reimbursement of LTC fare in lieu of deemed actual travel shall be allowed as exemption as per existing provisions. Therefore, TDS provision is not applicable on the amount of LTC fare, which is being reimbursed by employer. However, there are still some uncertain or unclear things in terms of the income tax applicability. IT department also issued clarification regarding various queries received relating to this scheme

FAQ

Can an employee avail of partial benefits of LTC cash voucher scheme?

An employee can avail of the scheme in partial, i.e. of the LTC of part of the eligible family. In such situations, LTC scheme benefits will be applicable to the fare left unutilized during the current block year starting from 2018 to 2021.

An employee incurs the expenditure on or before 31/3/2021 based on the invoice. Actual product or service received in April 2021?

The reimbursement is based on the production of an invoice with details of GST. As far as possible, the claim should be made and settled well before 31st March 2021 to avoid any last-minute rush and resultant lapse.

Do employees need to make a single purchase to get reimbursement under the LTC scheme?

There is no such prescribed format. The employees only need to submit an application to convey the desire to avail the LTC scheme benefits. If they need an advance for the purchase, the same is to be mentioned in the application.

Got Questions? Ask Away!

  1. Hello @MONU_KR ,

    An employee can claim an LTC exemption once he fulfills the required criteria.
    You can claim the available LTC exemption while filing Income Tax Return if the car is purchased before 31.03.2021. Further, you will have to retain the original bills to produce them as proof to IT Department on demand.

    However, the reimbursement shall be based on the production of the invoice to the employer with details of GST. As far as possible, the claim should be made and settled well before 31st March 2021.
    Hope this helps. :slightly_smiling_face:

  2. Ma’am,

    Thanks for considering my query and thanks for the resolution. But Ma’am As I have mentioned my company has stopped taking claims from 10.03.2021 and they have stopped the online portal for ltc cash voucher claim itself.

    I have asked them to consider my case as the scheme is till 31.03.2021 But my company has told me that as per corporate guideline they can’t do it now and I have to put it in ITR.

    I have also checked ITR utility excel sheet of FY2019-20 downloaded from IT website, in that as per sec 10(5) no place for description etc against the column where one can provide invoice no etc.

    Also your prompt response last line bothers me -“As far as possible claim should be made and settled well before 31st March 2021”.In my case claim settlement is not possible, but for sure my invoice date will be 21.03.2021-24.03.2021 possibly as my car loan processing is u/p and may take 2-3 days.

    Your expert solution/advice is highly appreciated as appx Rs 108000/- is on stake from my pocket.

    Thanks for sparing your time to assist and advise me.

    Regards,

    Monu Gulshan

  3. Thanks for you responses.

    I have decided to go through itr route if quicko has some facility for my case, I will provide the CAR invoice details with GST at the tiem of ITR.

    One more query in regard to ltc cash scheme, Leave travel allowance which will be non taxable will be 108000*3=324000 or 108000(considering a family of 3 members) And what will be the actual benefits for 30 percent tax bracket old regime (32400 or 97200).

    KIndly assist for my query.

    Regards,

    Monu Gulsahn

  4. thanks Ma’am,

    Please let me know if quicko can assist me or file my itr to avail ltc cash benefits as I have purchase car on 24.03.2021 and my company not accepting claim from 10.03.2021 onwards.

    Regards,

    Monu Gulshan

  5. Thanks Ma’am for your prompt response@ Profile - Ridhima_Sharma - TaxQ&A by Quicko - Get answers to all tax related queries & @Profile - Divya_Singhvi - TaxQ&A by Quicko - Get answers to all tax related queries.

    Kindly let me know as ITR-1 utility is out now, Can lta cash voucher exemption be availed now as my employer stopped taking claims since 10.03.2021 and my purchase date is 24.03.2021 well before 31.03.2021 but after my employer date i.e 10.03.2021.

    Kindly go through my previous queries in this regard.

    Please assist me as I will be getting significant LTA exemption.

    Regards,
    Monu Gulshan

  6. Ma’am,

    Is there any update & clarity on the same issue as utility & forms for filing are out now.

    Regards,

    Monu Gulshan

  7. Hi @MONU_KR

    The data in the utility will come prefilled from your Form 16. However, there is no such specific exemption mentioned in the ITR utility in relation to cash voucher scheme, but they allow you to mention other exemptions which has LTC as an option.

    Hope this helps :slightly_smiling_face:

  8. Hi @MONU_KR

    As per our opinion since this scheme was against LTC Scheme so you can claim LTC cash claim against LTC. For further clarity please refer to the following article and if you still have any doubts please reach us @ help@quicko.com

  9. i have purchased a car on 23.03.2021,will you assisted CA filing can ensure me of getting benifit of the same if i take your ca assisted filing plan of itr.

  10. Thanks @Divya_Singhvi It indeed helped. I would usually get LTC, but they did not accept purchase bills as per new policy of govt, and I could not travel, so I’ll lose 1 LTC of last block in that!

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