The government has allowed salaried individuals to claim their Leave Travel Concession (LTC) or Leave Travel Allowance (LTA) against the purchase of goods and services in October 2020. The move was taken as salaried individuals would not have been able to travel during the COVID-19 pandemic and thus were unable to claim their travel exemptions while filing income tax returns.
The LTC Cash Voucher scheme was launched to provide an alternate solution for such individuals. Within the scheme, by purchasing goods and services that command a GST of at least 12 percent taxpayers can claim up to one-third of the purchase price for tax exemption under the LTC Cash Voucher scheme.
However, taxpayers must be aware of some conditions and stipulations attached. The exemption is only valid for those individuals who have made their purchases between October 12, 2020, and March 31, 2021.
Additionally, the exemption is only valid for purchases made through digital means. If any purchase was made through cash, then it will not be valid to claim an exemption under the scheme. Online payment modes including UPI and mobile wallets along with cheques are the valid payment methods for this scheme.
Under the scheme, the maximum tax exemption an individual can be awarded is Rs 36,000. If one-third of the total purchases made by a taxpayer exceeds this amount, they'll not be exempted for their entire amount. However, individuals were allowed to submit these exemptions under their family member’s names. Thus, a family of four could claim a total exemption of Rs 1.44 lakh.
To claim the exemption on their ITR, an individual needs to collect the invoice for each of the purchases. The invoice should contain the GST number of the seller and the GST amount as well.
By submitting these invoices to the employer, whether in their names or their family members’ names, one-third of the purchase amount or Rs 36,000, whichever is the lowest, will then be exempted under Section 10(5) of the Income Tax Act.