The Revenue Tax Division on Thursday prolonged the I-T exemption accessible beneath the LTC money voucher scheme to staff of state governments, state-owned enterprises and personal sector. The Central Board of Direct Taxes in a press release mentioned that the cost of money allowance, topic to most of Rs 36,000 per individual as deemed Depart Journey Concession (LTC) fare per individual (Spherical Journey) to non-central authorities staff, shall be allowed income-tax exemption topic to fulfilment of situations.
“With the intention to present the advantages to different staff (i.e. non-central authorities staff). It has been determined to offer related income-tax exemption for the cost of money equal of LTC fare to the non-Central Authorities staff additionally,” the CBDT mentioned.
Non-central authorities staff embrace staff of state governments, public sector enterprises, banks and personal sector. The situations listed out by the CBDT for availing the tax exemption beneath the LTC money voucher scheme require the worker to spend a sum equal to 3 instances of the worth of the deemed LTC fare on buy of products / providers which carry a GST fee of 12 per cent or extra from GST registered distributors / service suppliers via digital mode between October 12, 2020 to March 31, 2021 and obtains a voucher indicating the GST quantity and the quantity of GST paid.
The staff should train an possibility for the deemed LTC fare in lieu of the relevant LTC within the Block 12 months 2018-21.
Additionally an worker who spends lower than thrice of the deemed LTC fare beneath the money voucher scheme shall not be entitled to obtain full quantity of deemed LTC fare and the associated income-tax exemption and the quantity of each shall be decreased proportionately.
With a view to compensate central authorities staff and incentivise consumption, thereby giving a lift to consumption expenditure, the federal government had on October 12 allowed cost of money allowance equal to LTC fare to Central Authorities staff topic to fulfilment of sure situations. It has additionally been supplied that for the reason that money allowance of LTC fare is in lieu of deemed precise journey, the identical shall be eligible for income-tax exemption on the traces of current income-tax exemption accessible for LTC fare.
“In view of the Covid-19 pandemic and resultant nationwide lockdown in addition to disruption of transport and hospitality sector, as additionally the necessity for observing social distancing, plenty of staff will not be capable of avail of LTC within the present Block of 2018-21,”it mentioned.
The CBDT mentioned that since this exemption is in lieu of the exemption supplied for LTC fare, an worker who has exercised an choice to pay earnings tax beneath concessional tax regime shall not be entitled for this exemption.
“The legislative modification to the provisions of the Revenue-tax Act, 1961 for this function shall be proposed sooner or later,” it added.
Explaining additional the CBDT mentioned if the deemed LTC Fare is Rs 80,000 (Rs 20,000 x four), then the quantity to be spent beneath the scheme is Rs 2,40,000. Thus, if an worker spends Rs 2,40,000 or above on specified expenditure, he shall be entitled for full deemed LTC fare and the associated income-tax exemption. Nonetheless, if the worker spends Rs 1,80,000 solely, then he shall be entitled for 75 per cent (i.e. Rs 60,000) of deemed LTC fare and the associated income-tax exemption.
In case the worker already acquired Rs 80,000 from employer prematurely, he has to refund Rs 20,000 to the employer as he may spend solely 75 per cent of the required quantity.
Nangia & Co LLP Accomplice Shailesh Kumar mentioned the efficient earnings tax profit for workers might vary between 6-9 per cent of quantity of whole expenditure incurred, relying on the best tax slab relevant to the worker.
“Thus, this earnings tax profit may very well be thought of as low cost on expenditure, which worker has already deliberate to incur, as a substitute of a cause to incur expenditure. Alternatively, earnings tax foregone by the Authorities could also be offset by the extra GST income on expenditure incurred by the staff,” Kumar added.