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).

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15 High Value Transactions traced by Income Tax department!!!!

The Income Tax department is tracking the undeclared income and on high value transactions. Also, department has made it mandatory for any person to furnish PAN in case of any high value transaction. Income Tax department gets the report of transactions of all high value made either through cash or bank. The reports of High value transactions are  known as Annual Information Report or AIR.

What is called high value transaction?

There is no definition of High Value Transaction and also it does not have to be assumed on the basis of turnover or net worth, however, threshold limit has been prescribed for the High Value Transaction. The list is as follows:-

1. Aggregate cash deposit for Rs 10 lakh or more in saving bank account.

Example, If You have two saving bank account with bank X. You have deposited Rs 6 lakh in one saving account and 5 lakh in another saving account, making it a total of Rs 11 lakh. As your total deposit exceeds Rs 10 lakh in a year, Bank X is required to report this to Income Tax department.

2. Purchase of bank drafts or pay orders in cash for Rs 10 lakh or more.

When cash for the purchase of Purchase Orders (POs) or Demand Drafts (DDs) or Bankers Cheque is made for Rs.10 lakhs or more in a year, banks are responsible to report such transactions.

3. Aggregate Fixed Deposits of Rs 10 lakh or more in a year.

Banks are required to report the cash payment made for Fixed Deposits amounting Rs 10 lakh or more in a year. However, these fixed time deposits will not include deposits made through renewal of other fixed deposit.

4. Purchase of any pre-paid instruments issued by RBI of Rs 10 lakh or more in a year.

Purchase of RBI pre-paid instruments like RBI bonds, etc. for more than Rs.10 lakhs is also categorised under High Value Transaction.

5. Cash deposit or withdrawal amounting Rs. 50 Lakh or more in one or more current account of a person in a year.

6. Cash received for amount exceeding Rs. 2 Lakh for the sale of goods or rendering of services.

7. Expenditure in foreign currency via debit card, credit card or traveler’s cheque for the amount Rs.10 Lakh or above in a year.

When any person buys or spends Foreign currency for Rs. 10 lakh or more through debit card, credit card or traveler’s cheque, then such transactions are also required to be reported.

8. Payment by credit card amounting Rs.10 Lakh or above in a year.

If Credit Card payment in an aggregate exceeds Rs. 10 lakh in a year, then the institution issuing the credit card is required to report such transaction to the Income Tax department.

9. Credit card bill paid in cash for Rs 1 lakh or more.

When credit card bill is issued to any person and that person pays the bill in cash amounting Rs 1 lakh or more, that transaction is also considered as High value transaction. 

10. Purchase or sale of immovable property having value of Rs. 30 Lakh or above.

When someone sells or purchases any immovable property having guidance value of Rs 30 lakh or more, then such transaction is also High Value Transaction. The actual price of sale or purchase is irrelevant.

11. Mutual Fund Investment in a year of Rs 10 lakh or more.

When any person purchase units of mutual fund for Rs 10 lakh or more, then such transactions are considered as high value transactions.

12. Purchase of bonds or debentures for Rs 10 lakh or more in a year.

Similarly, when any person purchase bonds or debentures for Rs 10 lakh or more, then such transactions are also considered as high value transactions.

13. Purchase of shares of company for Rs 10 lakh or more.

When anyone purchase shares of a company through the public offer or right issue amounting Rs. 10 lakh in a year, that transactions are also required to be reported to Income Tax Authorities.

14. Share buy-back from a person amounting Rs. 10 lakhs or more.

15. Cash deposit in current account above Rs 12.5 Lakh or in any bank account more than Rs. 2.5 Lakh after Note-Ban i.e period from 9th Nov, 2016 to 30th Dec, 2016.

To Avoid any legal proceeding, it is better to declare any such transaction during individual returns filing without fail.

TDS on Cash Withdrawal w.e.f. 1 July 2020

Finance Act, 2020 tightened the existing provisions U/S 194N for those who have not been filing income tax returns. This will be applicable from July 1, 2020.

To discourage cash transactions in the country and promote digital economy, the government, in July 2019, introduced Section 194N in the Income Tax Act, 1961 for tax deducted at source (TDS) at the rate of 2 per cent on cash withdrawals over and above ₹1 crore.

The Finance Act, 2020 tightened it by lowering the threshold of ₹1 crore to ₹20 lakh for those who have not filed their income tax returns (ITRs) for the past three years. Further, the rate of TDS has also been increased to 5 per cent for these taxpayers for withdrawal exceeding ₹1 crore.

PRE-VALIDATE BANK ACCOUNT FOR IT REFUNDS & EVC FOR RETURNS FILING

Dear Tax Payers,

You need to pre-validate your bank account to receive income tax refunds (if any) and to file your income tax returns instantly with EVC.

For claiming refund, you will have to make sure that you have pre-validated your bank account in which you wish to receive the income tax refund once your return is successfully filed or when filing your ITR.

Please find steps to pre-validate your bank account details in https://www.incometaxindiaefiling.gov.in/  (Income tax returns filing portal).

PAN Card-Aadhaar Card Linking Deadline extended till March 31, 2021

The PAN -Aadhaar linking last date has been extended till March 31, 2021. The previous deadline for linking PAN and Aadhaar was June 30, 2020.

If you already have the PAN card and are eligible to obtain Aadhaar number or you have already acquired one, then you are required to link the Aadhaar number to the PAN. PAN & Aadhaar linking needs to be completed else the PAN will become ‘inoperative’. Once the PAN becomes inoperative, one will not be able to undergo several transactions where PAN is required to be quoted mandatorily. The IT Dept. has specified 18 financial transactions where quoting of PAN is mandatory by the individual.

Process to link Aadhar with PAN:

To link Aadhaar with PAN card, one may go to the e-filing website of the income tax department (https://www.incometaxindiaefiling.gov.in/home). One may use log-in credentials or even without logging, the linking of Aadhaar and PAN can be done. The income tax department has made it clear that for filing of ITR, Aadhaar and PAN linkage is mandatory unless specifically exempted.

PAN and Aadhaar can also be linked through SMS to 567678 or 56161 through your registered mobile number. The format of the SMS is: UIDPAN<SPACE><12 Digit Aadhaar Number><SPACE><10 Digit PAN> For Example: UIDPAN 100023456789 XXYZ0123X

Consequences of Non-filing (or) delayed filing of Income Tax Return!!!!

The due date of furnishing Income Tax Return for FY 2018-19 has been extended till 31^st July, 2020 and for FY 2019-20 till 30^th November, 2020.

There are many benefits of filing the Income Tax Return but there are some adverse consequences of Non-Filing of the Income Tax Return which includes Penalty under Section 271F of Income Tax Act, 1961, Interest under Section 234A of Income Tax Act, 1961,  Non-Carry Forward of Losses, Claim of Refund of Taxes, Prosecution for Failure to Furnish Return of Income etc.,

The same in detailed are listed below:

1. Interest under Section 234A of Income Tax Act, 1961: Default in furnishing ITR may attract Interest @1% per month and part thereof up to the date of filing of the return, on such unpaid tax amount.

2. Non-Carry forward of Losses: Losses will not be allowed to be carry forward if the income tax return is filed after the deadline. However, the loss under the head “Income from house property” can be carried forward even if the return of income/loss is furnished after the due date of furnishing return.

3. Claim of Refund of Taxes: Interest on refund u/s 244A may be lost as delay in filing is attributable to you for the period by which you have filed late return.

4. Penalty u/s 234F: If a person fails to furnish return before due date, the assessing officer may levy a penalty in the following manner:

Date of filing	Fees Leviable
If the return is furnished after the due date of filing but on or before the 31st day of December	Rs. 5,000/-
In any other case	Rs. 10,000/-
Note: If the total income of the person does not exceed five lakh rupees, the fee payable under this section shall not exceed one thousand rupees.

5. Prosecution for failure to Furnish Return of Income: In case the return of Income is not furnished before the due date, don’t be surprised if you receive notice of prosecution u/s 276CC.

Don’t wait for the deadline and get your Income Tax Return filed on or before due date to avoid penalty.

Income Tax Return Filing: Filing ITR? Make sure to check your latest Form 26AS!!!!

Form 26AS (Annual Tax Statement) is an essential document for taxpayers containing details of all the taxes tagged against a taxpayer’s PAN and serves as an important reference while filing income tax returns (ITR).

To usher in enhanced transparency between tax authorities and taxpayers, the Finance Act, 2020 introduced changes to the existing Form 26AS and mandated certain additional information to be included in the new Form 26AS.
The improved Form 26AS includes information on certain cash transactions, investment in shares, bonds or mutual funds, credit card bills, purchase of foreign currency and purchase/ sale of immovable property.

The updated Form 26AS will consist of the below mentioned information, in addition to the details (such as PAN, address, details of TDS, details of tax collected at source, details of taxes paid during the year) which were already available:

      Ø   Personal details such as, date of birth/ incorporation, mobile number, address, e-mail id

Ø  SFTs such as donations, forex transactions, acquisition of shares from companies, buy back of shares

Ø  Tax demands

Ø  Details of pending and completed assessment proceedings

Ø  Details of information received from foreign jurisdictions under Exchange of Information (EOI) clause of tax treaties.

Better to disclose SFT (Statement of Financial Transactions) while filing ITR:

The changes in Form 26AS would serve dual purpose as honest taxpayers would be enabled to file accurate ITR with the help of updated information on their financial transactions and it would discourage those who conceal information about specified financial transactions.

For example, a person earning foreign income and qualifying as tax resident in India is required to file his ITR, disclosing his foreign income and assets and should therefore file his ITR appropriately by disclosing the income and assets which are required to be reported in India.

As the tax return filing deadline for FY 2019-20 approaches, taxpayers should download their latest Form 26AS, reconcile the numbers and remit tax due (if any), before filing ITR.