Finance Ministry extends LTC cash voucher scheme to non-central government employees

The non-central government employees include employees of public sector enterprises, state governments, banks and the private sector.

Oct 30, 2020 11:18 IST

The Union Ministry of Finance has decided to extend the income tax exemption available under the leave travel concession (LTC) cash voucher scheme to non-central government employees as well. The move is aimed at boosting consumer spending in the wake of the COVID-19 pandemic situation.

The move will allow non-government employees to claim tax-free cash allowance from their employers if an Leave Travel Concession scheme is included in their working contract similar to the one in government sector. 

Objective

The move aims to boost consumer spending ahead of the upcoming festive season.

Who are non-government employees?

The non-central government employees include employees of public sector enterprises, state governments, banks and the private sector.

What is LTC?

Under the Leave Travel Concession, the employer reimburses the travel cost of the employee and his family to any place for a holiday or to the employees' home town. Only the travel cost is reimbursed under the scheme. The extent of reimbursement is subject to the designation of the employee.

The Leave Travel Concession is exempted under the income tax act subject to certain conditions. The exemption is only allowed for two travels within a block of four years. The current block is 2018-21.

While this scheme was extended earlier to central government employees, it would now also be applicable for employees of other sectors. 

Significance

With this employees will have an option to avail the cash equivalent of entitled LTC fare and leave encashment without travelling, as travel has become restricted due to the COVID-19 pandemic. The employees will be eligible to purchase goods and services in place of the tax-exempt portion of the LTC or LTA.

Background

The central government had on October 12, 2020 announced that it will be giving out cash vouchers to central government employees this year in place of LTC fare, which could be spent on buying of non-food items that fall under the GST rate of 12 percent or above.

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