LTC Cash Voucher Scheme

The COVID-19 pandemic and the consequent nationwide lockdown disrupted people's travel plans.
Hence, many are not able to utilize the Leave Travel Allowance (LTA) available in their salary
structures.

Considering the difficult economic environment, and in order to incentivize individuals to utilize their
unclaimed LTA amounts and to boost consumer demand, the government had issued relaxed
guidelines. The guidelines had considered the payment of a cash allowance equivalent to the deemed
LTC fare to Central Government employees in lieu of LTA Travel by introducing the LTC Cash Voucher
Scheme on October 12, 2020. The LTC Cash Voucher Scheme was further extended to non-Central
Government employees on October 29, 2020 followed by multiple set of frequently asked questions
providing a similar Income tax exemption, thereby bringing relief to Private Sector employees as well.

The criteria of LTC Cash Voucher Scheme is outlined below-

1. Tax Exemption is eligible for Private sector employees who are eligible to claim the Leave
Travel Allowance (LTA). Employees who have opted for the new tax regime will not be allowed
to take the benefit of the exemption.

2. To avail this tax benefit, the employee is required to spend three (3) times (refer the
illustration in the last page of this document) of the eligible amount on the purchase of goods
or services which carry a GST rate of not less than 12% from GST registered vendors/service
providers and the payments shall be made through digital mode only. Hence, payments made
in cash are not allowed under this scheme.

3. The purchase of such goods/ services can be done through multiple bills and can be purchased
from online/e-commerce platforms also.

4. The employee can avail tax exemption benefit 1/3rd of the amount spent on purchase of
Goods/Services, subject to a maximum exemption limit of LTA allowance given by the
employer.

5. The maximum deemed LTC fare is Rs. 36,000 per person under this scheme (the list of eligible
family members are provided in the LTC claim form).

6. The employee has to submit the GST invoices to the employer for claiming the exemption
under this scheme. The GST Invoices should be in the name of the employee or his or her
family members.

7. This is an optional scheme. An employee can either claim LTA in the Block year 2018-21 or
new LTC Cash Voucher Scheme. Both LTA and LTC should not be claimed.

8. Only two claims will be eligible for tax exemption in the current LTA Block of 2018-2021. If the
employee had already availed two exemptions in the Block of 4 years (2018-2021), then the
LTC Cash Voucher exemption benefit should not be availed.

9. The LTC Cash Voucher Scheme is applicable on the purchase of Goods/Services made between
12-Oct-2020 to 31-Mar-2021.
 10. Employees who have not declared for LTA exemption or declared to draw LTA amount
monthly will NOT be eligible to claim this benefit. To claim this benefit employee should have
made investment declaration initially for LTA exemption in GreytHR.

11. Employees opting for LTC Cash Voucher Scheme shall fill the “LTC Cash Voucher Form” and
submit it along with GST Invoice.

12. Amount/Invoices claimed towards monitor reimbursement for WFH option and towards
fitness benefit should not be included in the “LTC Cash Voucher Scheme”

Employees for whom LTC Cash Voucher Scheme is NOT available:

 Employee who has opted for monthly LTA allowance while submitting the Income
tax/investment declaration.
 Employee who wishes to claim LTA exemption by way of submission of travel Bills.
 Employee who had already availed two exemptions in the Block of 2018-2021 towards
claiming exemption of LTA
 Employees who have opted for the New tax regime
 Purchases done by employees by way of Cash payment.

Quick Reference on LTC Cash Voucher Scheme:

Effective Date of the Scheme 12.10.2020

Period covered for spending 12.10.2020 to 31.03.2021

Spending on Any Goods and Services

Rate of GST 12%, 18% and 28%

Payment mode Only Digital mode

Amount to spend 3 times of deemed LTC Cash Voucher

Tax Invoice In the name of the employee or his/her family members

Tax Exemption Benefit Submission of GST Invoice.

Limit on transactions No Limit. Multiple GST Invoices are allowed.

Illustration on Computation of LTC Claim Amount:

(a) Mr. A is an employee of a corporate sector under the LTA scheme

(b) LTA amount based on salary structure is Rs 1,50,000
(c ) Eligible Family Members (as per Income Tax LTC Rule) 4
(d) Maximum benefit (36,000*4)
(The guidelines of the LTC scheme for Private employees provide a Rs 1,44,000
maximum benefit of Rs 36,000 per person)
(e) Amount need to spend on purchases as per the specified scheme (3
Rs 4,32,000
times of deemed fare (maximum benefit)) = 1,44,000*3
(d) Taxable LTA amount (1,50,000 – 144,000) Subject to condition that Mr.
Rs 6,000
A spend the entire Rs 4,32,000 for specified purchases
(e) LTA Exemption in case of less amount spent on the purchase. Suppose
Mr. X purchases only for Rs 2,00,000/- LTA exemption will be Rs 66,666
proportionately reduced (1,44,000/4,32,000*2,00,000)
(f) Taxable LTA in case of less amount spent on the purchase (1,50,000-
Rs 83,334
66,666)