New LTC scheme brings festive cheer to CG employees

The employees can now claim LTC benefit against bills for goods and services

0
2928

We all knew that leave travel concession or LTC was an exemption claimed by employees in the government as well as private sector— under Section 10(5) of the Income Tax Act— against bills submitted as proof of travel fare, twice in four years. Now, a new scheme has been announced wherein employees can claim LTC benefit by submitting proof of expenses incurred in buying goods and services.

The well-timed scheme will be of immense benefit to employees who plan to spend heavily during the festive season.

The scheme is meant for employees who are unable to claim LTC benefit in the four-year period of 2018-21. However, the it is likely to be more beneficial to government employees as they receive LTC benefit in addition to their salary. For private-sector employee, on the other hand, the LTC is usually a part of the CTC. If it is not claimed, it is paid to them after tax deduction. How private-sector employees will avail this benefit is yet not clear.

Central-government employees have been issued a circular explaining that an amount equivalent to 100 per cent of the leave encashed and half of the value of estimated travel fare will be deposited in advance into their bank accounts. The remaining will be paid against submission of bills of purchase of goods and services.

The amount received as LTC fare will be exempt from tax, as long as the employee spends an amount that is equal to three times the LTC fare and leave encashed.

Therefore, employees in the 30 per cent tax bracket will save about Rs 12,000 as tax, exclusive of surcharge and cess.

The amount received against leave encashed will be taxable and tax will be deducted at source, according to the slab rate, before payment is made to the employee.

However, the benefit can be availed only if the money has been spent via the digital mode, and on only those goods and services that attract a minimum of 12 per cent GST. The invoice indicating the GST number of the vendor as well as GST paid will also have to be submitted for claim.

Comment on the Article

Please enter your comment!
Please enter your name here

four × one =