By Vinayak Iyer
The foundations for the LTC Money Voucher scheme, which was introduced in October 2020, have been included within the Memorandum to the Finance Invoice 2021.
LTC Money Voucher Scheme
Throughout 2020, because of the COVID-19 pandemic, such LTC (depart journey concession) associated journey was not potential. The federal government launched an alternate strategy to avail this exemption by procuring items or providers topic to under circumstances:
Bought items or providers from GST registered distributors ought to have 12% or extra GST
Cost must be between October 12, 2020 to March 31, 2021 and digitally made
By fulfilling these, an worker can get exemption for least of the under:
a) Rs 36,000 per eligible particular person (household outlined as per LTA guidelines) or
b) 1/third of the expenditure incurred or
c) The CTC eligibility of LTA
Factors to contemplate
Whereas the brand new scheme definitely offers advantages, the extent of the advantages might differ from one worker to a different. So, two extra factors must be thought of:
1. If you happen to go for the brand new LTC Money Voucher Scheme, it will likely be towards one journey between 2018-2021.
2. So, when you have been unable to journey in 2020, are there some other alternate options to the LTC Money Voucher Scheme? The reply is Sure.
An alternative choice is already obtainable within the current LTA guidelines (known as LTA carry ahead choice). Underneath this, if an worker doesn’t declare one or each journeys in a block of 4 years, he can carry ahead one journey to the following block supplied the journey is within the first 12 months of the following block.
The LTA carry ahead choice subsequently presents the under situations:
One exemption every will be claimed in 2021 and in 2022 if no exemption was claimed from 2018-2020
One exemption will be claimed in 2021 or in 2022 if one exemption was claimed from 2018-2020
If each exemptions have been claimed from 2018-2020, you aren’t eligible for LTC money voucher or LTA carry over choice
To decide on between LTC Money Voucher Scheme and LTA carry ahead choice, consider the under:
1. What’s your LTA eligibility as a part of your CTC? Assume it’s Rs 75,000
2. Will you be capable to spend 3 times your LTA eligibility by March 2021 on eligible Items or providers (not less than Rs 2,25,000 within the above instance)?
3.What number of eligible dependents do you will have (as per LTA guidelines)? It’s best to have minimal three dependents together with self to get Rs 75,000 exemption within the above instance.
If you happen to spend lower than 3 times your LTA eligibility or have fewer dependents, you’ll get much less exemption.
Nevertheless, beneath the LTA carry ahead choice, larger exemption could also be obtainable for a similar quantity incurred on journey in 2021 / 2022 (topic to LTA journey guidelines)as in comparison with the LTC Money Voucher Scheme.
Conversely, when you consider that it’s extremely unlikely that it is possible for you to to undertake LTA associated travelling in 2021 and 2022, and you may incur the bills by satisfying different circumstances beneath LTC Money Voucher Scheme, you may get the proportionate one third exemption. As per the Memorandum, the LTC Money Voucher scheme isn’t obtainable after March 2021. Due to this fact, chances are you’ll need to take a look at the very best appropriate choice to you based mostly on the situations listed above.
The author is director, Tax ACR, EY India.
The views expressed are private