LTC cash voucher scheme for employees: How does it work? How to compute it??

 

LTC CASH VOUCHER SCHEME

In the wake of coronavirus pandemic, people are avoiding travel. "Considering this peculiar scenario and due to the need to boost demand, the government has introduced new LTC voucher scheme wherein the Central government and its PSUs shall pay to its employees the maximum amount of LTC that can be availed by such employee, upon fulfilling certain spending related conditions.

Who are eligible:-

This scheme is basically meant for the employees of the Central government, Public Sector Banks (PSBs) and Public Sector Undertakings (PSUs). However, as per the notification, tax concession will be allowed for state government and private sector employees too who currently are entitled to LTC, subject to the guidelines of the Central government scheme.

 It is important to note that the memorandum refers to only employees of the Central Government and hence requires a notification that extends benefit to private sector and State government. While the respected finance minister in her speech did indicate that the state government and private sector employers are also eligible for the scheme and will be eligible for tax concession, however, since the mention of this is absent in the memorandum.

 

Brief note about LTC Cash Voucher:-

Travel by an employee and or his or her family members is one of the conditions to avail the exemption under LTA/LTC. "Those employees who were not planning to avail or have not been able to avail of the the LTC owing to fear of the pandemic, have an opportunity to claim LTC under the new scheme, which would have otherwise lapsed on March 31, 2021.

 

This scheme is comprises both LTC / LTA & Leave encashment and both should be utilized for availing benefits under LTC Cash voucher scheme. If the employee intends to avail the benefits under the tax concession scheme, the employee will have to spend three times of the amount received as LTA and an amount equal to the value of leave encashment.

 

It must be noted that in order to avail benefit of this package, an employee should opt for both leave encashment and LTC / LTA fare.

 

The cash equivalent of entitled LTC fare and leave encashment will be given to the employee if they fulfill the following conditions:

Ø  The employee spends an amount equal to the value of three times of the LTC and one time of the leave encashment amount for the purpose of purchasing non-food items i.e. white goods.

Ø  The item purchase or services availed shall carry a GST Rates not less than 12%.

Ø  Such purchase shall be from GST registered vendors or service providers through digital mode.

Ø  The employee shall obtain a voucher indicating the GST number and the amount of GST paid.

Ø  The money on goods/services must be spent before March 31, 2021.

The deemed LTC fare for Central Govt Employees for this purpose is as follows:

1) Employees who are entitled to business class of airfare: ₹36,000 (per person Round Trip)

2) Employees who are entitled to economy class of airfare: ₹20,000 (per person Round Trip)

3) Employees who are entitled to Rail of any class: ₹6000 (per person Round Trip)

 

Computation of Special Package – LTC Cash Voucher:

 The special package in lieu of LTC is a derivative of actual spending done by an employee. Thus, if an employee spends the full amount of leave encashment and 3 times the amount of LTC fare (specified slabs), the quantum of reimbursement will be equal to the total of Leave Encashment and total LTC fare. If he spends less, the amount of reimbursement will be proportionately reduced to that extent.

 An illustration is given below for ease of understanding:

Particulars	Reference	Amount	Final Amount
Leave Encashment (10 Days)		25000	25000	A
Fare Denoted for LTC as per the notification based on the employment category		20000
Self + Family Members	1 + 3 = 4		80000	B
Amount to be spend by Employee
3 Times of LTC Eligibity			240000	C = B * 3
1 Time of LE Eligibility			25000	A
Total Spending should be done			265000	D = A + C
Tax Exemption  for the actual eligible amount / Total Eligible Cash reimbursement			105000	E = A + B

 If an employee has some planned expenditure to buy certain goods or avail certain services in the upcoming festive season, he / she can opt for this scheme. However, from the angle of taxability under the Income-Tax Act, the order has provided that the legislative amendments to the provisions of the Income-Tax Act, 1961 shall be proposed in the due course. Thus, we have to wait for such amendment notification in order to gain more clarity on taxability aspect for current fiscal year (FY2020-21).

Please share and comment for more such informative post - Vj

Central Govt agrees to waive interest on interest of EMI Moratorium (March'20 to August'20) for Individual, MSME loans up to ₹2 Crore

Centre agrees to Waive Interest on Interest of EMI Moratorium (March'20 to August'20)for Individual, MSME Loans up to 2Crore!!!

The central Government informed that loans up to 2 crore taken by individuals, micro, small and medium enterprises (MSMEs) are eligible for waiver of compound interest charged for the 6 months EMI offered as Moratorium from March'20 to August'20.

In other words, borrowers will not have to pay interest on interest. During the period of Moratorium, interest accrued in case of EMI deferred becomes a part of principal and then interest calculated on the larger base. This compound interest is nothing but the interest on interest. 

The Reserve Bank of India had allowed borrowers to seek a six-month moratorium on all loans due to the economic impact of the coronavirus crisis, but banks and finance companies charged interest on the entire amount: the interest as well as the interest liability.

The affidavit submitted by central ministry dated, 2nd Oct said that "Government has decided to waive-off compound interest charged to the borrowers for the six-month loan moratorium". Now the apex court will hear all the pleas on 5th Oct before issuing the order.

The affidavit listed eight categories of loans for waiver of compound interest. These include MSME loans up to 2 crore, education loan, housing loan, auto loan, consumer durable loans, credit card dues, personal loans to professionals up to 2 Crore and consumption loans up to 2 crore.

According to affidavit, full waiver of interest on all the loans and advances to all classes and categories of borrowers for six-months period would cost six lakh crore. "If the banks were to bear this burden, it would necessarily wipe out  a substantial and major part of their net worth, rendering most of the banks unviable and raising a very serious question mark over their survival," it mentioned.

The government has also informed the Supreme Court that that the bearing this burden would “naturally have an impact on several other pressing commitments being faced by the nation, including meeting direct costs associated with pandemic management, addressing basic needs of the common man and mitigating the common man's problems arising out of loss of livelihood."

Please follow, like & share for more such informative posts - Vj