The LTC Cash Voucher Scheme replaces the original leave and travel concession in a year. It is for the employees of the government, state, central, and private sectors. This scheme has two sections – travel allowance and leaves encashment. Here is how it works:
- Travel Allowance
The government provides travel allowance to state and central employees. Even a private-sector company may offer this facility to its employees. The allowance is for travel expenses in India. It is for employees and their family members. The amount up to the limit permitted is free of tax. When filing an income tax claim, employees can claim a refund for the travel expenses.
- Leave Encashment
In Leave Encashment, the employees get a specified amount in exchange for the number of leaves not taken in a year.
In this post, we will discuss conditions and rules under which you as an employee can claim the LTC Cash Voucher benefits, and income tax exemptions, along with reimbursement for the premiums paid for health/life/term insurance plans.
Conditions to Avail Benefit of LTC Cash Voucher Scheme
But due to restrictions of the Covid-19 pandemic, many were unable to claim tax exemption for travel allowance. So, the government introduced the LTC scheme with a few changes. The scheme aids you to claim income tax benefits on travel allowance and leave encashment if you fulfill the following conditions:
- You have to purchase services and goods that have a minimum GST rate of 12%.
- You have to buy goods and services such as two-wheelers, four-wheelers, household appliances, prepaid services such as broadband payments, mobile phone bills, DTH recharge, etc through vendors registered for GST.
- You must buy only through a digital payment mode. Cash payment is not eligible for deduction.
- You can purchase life insurance and health insurance plans such as a simple term plan and receive reimbursement up to the permissible limits for the paid premiums.
- You can buy goods and services up to 2021 March, 31 as the benefit of the LTC scheme is for the year block 2018 to 2021 only.
- You can only utilize one of the scheme benefits in a block of a single year.
Other Rules that Employees Need to Comply With
Here are the norms that you have to adhere to:
- The money you spend has to be three times the maximum LTC fare value. The LTC fares presently differ for different categories of employees and their travel eligibility.
- You have to spend money of 100% same as the value of leave encashment to claim the benefit.
- You have to submit the receipts of the amount spend as proof. This also has to include the details of GST paid and invoice towards the services and goods you purchased to claim the benefit.
- You will receive 50% of the travel fare amount and 100% of the leave encashment amount in your bank account. The remaining amount is payable on submitting the proof of purchase.
- It is optional to claim the leave encashment benefit. But otherwise, you have the option to avail yourself only of the travel fare benefit.
LTC Cash Voucher Scheme for Health, Term, and Life Insurance Plans
This scheme is applicable for the premiums paid for life insurance, term insurance, and health insurance plans. But it is only available for policies taken between October 12, 2020, and March 31, 2021. You can get reimbursement for premiums paid for these policies within the permissible limits. Also, the reimbursement is pertaining to the sections under the Income Tax Act, 1961.
- For instance, you purchase a term plan, then you can receive reimbursement on premiums under Section 80C, for up to Rs. 1,50,000.
- And, if you purchase a health insurance plan, then reimbursement on premiums paid is available under the same section of the Income Tax Act, for an amount up to Rs. 75,000.
The LTC Cash Voucher Scheme is feasible to save on income tax. Also, you can use the travel fare reimbursement and leave encashment, and make even bigger savings.