7th Pay Commission: Good News for Central Govt employees, LTC cash vouchers scheme will not be taxed

New Delhi: The Central government has announced a relief to those central employees who could not take advantage of LTC due to Covid19 pandemic. In the budget, the Finance Minister has announced that the Cash Voucher Scheme of LTC (Leave Travel Concession) will not be taxed. Due to the pandemic, the center has extended this income tax relief for all salaried taxpayers for the four year cycle of 2018-21.

“In order to provide relief to employees, it is proposed to provide tax exemption to the amount given to an employee in lieu of LTC subject to incurring specified expenditure,” the Finance Minister had said, as reported by Zee Business.

On October 12, the scheme was first announced for government employees. However, later it was extended to cover non-government employees as well.

A government employee, opting for this scheme, will be required to buy goods or services worth 3 times the fare and 1 time the leave encashment before 31st March 2021. Also, only digital transactions are allowed and GST Invoice have to be produced.

The scheme was announced on 12 October 2020. Earlier this scheme was for central employees only but now private and other employees have also been included in the scheme. In her budget speech, Finance Minister Nirmala Sitharaman said, The government hopes that the scheme will also put money in the pockets of government employees and when they have money in their pockets, they will also spend it. This whole system will benefit the economy. Employees who could not avail the benefit of LTC due to Corona will be given the benefit of Cash Voucher Scheme in ‘Travel Allowance Space Scheme’