How Beneficial Is Leave Travel Concession (LTC) Cash Scheme?

New Delhi : Many Indian middle class families use LTC (Leave Travel Concession) to travel to different parts of the country. Due to Covid’s restrictions, citizens could not go anywhere this summer. But after hearing about the new LTC Cash Scheme last week, many middle class families want to take advantage of the scheme.

What is the LTC Scheme?

The LTC scheme is a help that employees get from their employer while going out on holidays. The employee and his family can go on holiday anywhere in the country once in four years. The current period of four years is 2018-2021. Under this, an employee availing LTC can avail leave encashment of maximum 10 days. This leave encashment is decided on the basis of basic salary + dearness allowance. The new scheme has three categories of employees.

New plan terms

State governments and private sector employers can also provide this facility to their employees, so that they too can take advantage of this scheme.

• Employees will have to take all the cash they are entitled to under the leave encashment under the scheme. it’s mandatory.

• Employees will have to spend three times the rent and equal to the amount received under the leave encashment on the purchase of goods and services which have a GST of 12 per cent.

• Employees availing this scheme will have to spend this entire amount before 31 March 2021.

• Money has to be spent online and GST receipt will be required.

• It will lapse if the LTC plan of 2018-21 period is not availed.

One can understand this scheme with an example. Without this scheme, a government employee with a basic salary of 55,000 gets AC 2 tier fare whenever he goes anywhere in the country. If this person comes from Chennai to Delhi, one way fare will be Rs 3,500 and the travel cost of wife and two children will be Rs 28,000.

But under the LTC voucher scheme, this person will come under the train fare of Rs 6,000. A family of four will get Rs 24,000 under the scheme. But he would have to spend 72,000 rupees for the purchase of goods and services. He will also get Rs 18,333 as a 10-day leave encashment, but he will have to spend the entire amount. In this way, that person will have to spend Rs 90,333 to get Rs 42,333. Then TDS is applicable to leave encashment, while LTC amount will be useful in tax benefits.

Obviously, it is better not to take advantage of this scheme for a nominal economic benefit. If a person wants to buy essential items for domestic use and is willing to spend for it, then only he should take advantage of this scheme, otherwise not. Then the scheme is not beneficial even for the employees who have shifted from the old slab of income tax to the new slab, as the new tax slab does not have the provision of income tax exemption.