Personal Finance

Should you opt for LTC cash voucher scheme?

Updated : October 14, 2020 05:31 PM IST

Government employees usually get LTC to any destination of their choice, plus one to their hometown every four years.

According to the announcement, the cash voucher can be spent only for purchasing non-food-related GST items via digital mode, till March 31, 2021.

The government has announced Leave Travel Concession (LTC) cash voucher scheme that will allow government employees to purchase goods and services in lieu of the tax-exempt portion of LTC.

Government employees usually get LTC to any destination of their choice, plus one to their hometown every four years. However, as the ongoing pandemic has restricted travel plans this year, the government decided to extend cash vouchers to central government employees.

With the upcoming festive season, this move has been aimed to generate an uptick in consumer spending.

According to the announcement, the cash voucher can be spent only for purchasing non-food-related GST items via digital mode, till March 31, 2021. Employees can only purchase items from GST registered vendors, and buy goods and services which attract 12 percent or more GST. They will also have to produce the GST invoice for the goods/ services purchased.

However, the important point to note is that one needs to spend money worth three times the deemed fare and 1 time the leave encashment in order to avail of this offer.

Anuj Kacker, co-founder of MoneyTap calls it a game-changing financial alternative for employees.

"At a time when people are reluctant to travel due to the on-going pandemic, the scheme can help them in spending the amount on other necessities such as laptops, mobile phones, washing machines, etc., which are crucial in today's WFH culture," he said.

On the other hand, Puneet Khurana, HR Head, Paisabazaar feels that this announcement will encourage employees, especially the middle-class salaried population, towards postponing the idea of availing LTC to subsequent years, instead of doing so during this scheme's applicability period.

"This scheme is most likely to be availed only by employees who are planning to spend big during the festive season, given that one needs to spend 3 times the LTC amount to claim the benefits of the scheme and tax exemption till March 31, 2021," he opines.

In the words of Pranjal Kamra, CEO, Finology, "It's an attractive offer for the government employees who have not availed LTC from 2018 -2021 as the LTC amount couldn’t have lapsed in case they had not undertaken the journey within the stipulated time period."

However, Kamar advises that individuals who have surplus liquidity and who were already planning to spend in this festive season or who have the necessity of buying goods or services in this financial year should only avail of this scheme.

Rachit Chawla, CEO, and founder, Finway FSC seconds Kamra's views.

"Since the scheme is optional, one should consider the situation before availing it. The benefit of the scheme is only that the employees can get cash reimbursement from their employer of the maximum amount of LTC eligible to them," he says.

The tax exemption will only be available for the cash payment in lieu of LTC and the leave encashment portion will be taxable in the hands of an employee.

So, the total tax savings on this scheme will depend on the actual LTA amount and the tax slab of the Individual. Employees should also be mindful of this before availing of the scheme.

Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

Should you opt for LTC cash voucher scheme?

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