By opting for this scheme, employees can purchase goods and services in lieu of the tax-exempt portion of the Leave Travel Concession/Leave Travel Allowance (LTA/LTC). He/she can claim tax-exemption on the travel fare encashed if the amount is spent by satisfying specified conditions.
But to avail of these schemes, an employee needs to spend an amount equal to the value of leave encashment and an amount three times of the cash equivalent of deemed fare, on purchase of items or avail services. The spending has to be done through the digital mode before March 31 on goods and services that attract GST of 12% or more. The employee shall obtain a voucher indicating the GST number and the amount of GST paid.
Saraswathi Kasturirangan, Partner, Deloitte India says, "To avail the tax exemption employees are required to either purchase goods or services which are 3 times the amounts which would be claimed as a concession in respect of travel tickets within 31 March 2021."
Let's check if you are eligible for the scheme:
This scheme is not applicable to employees who have opted for the new tax regime, in which tax rates are lower but you let go of most deductions and exemptions.
Also, the taxpayer should not have already exhausted the LTC exemption for the block (current block is 2018-21). Every taxpayer can claim leave travel allowance (LTA) exemption for two journeys in a block of four years.
The scheme was initially launched for government employees but was later extended to private sector employees as well.
To avail of the benefit under this scheme, employees are required to submit bills for purchases made between 12 October and 31 March.
The amount required to be spent is equivalent to three 3 times the deemed LTC fare. Bills of goods and services with GST of 12% or above can be claimed under the scheme. The payment for the goods/services is mandatorily required to be made through a digital mode.
So, only if you fulfill the above mentioned conditions will you be able to claim the benefits under the scheme.
