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Non-central employees now under LTC cash voucher scheme
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SME Times News Bureau | 29 Oct, 2020
Government on Thursday extended tax exemption on cash allowance of LTC
fare paid in lieu of deemed actual travel to non-government employees in
a bid to encourage the private sector to support government initiative
to generate demand in the economy.
The fresh stimulus measure
would allow non-government employees as well to claim tax free cash
allowance from their employers if a LTC scheme similar to one in the
government sector is included in their working contract.
"In
order to provide the benefits to other employees (i.e. non-Central
Government employees) who are not covered by the above mentioned OM (the
October 12 decision for central government employees) it has been
decided to provide similar income-tax exemption for the payment of cash
equivalent of LTC fare to the non-Central Government employees also," a
finance ministry statement on the proposed changes said.
"Accordingly,
the payment of cash allowance, subject to maximum of Rs 36,000 per
person as Deemed LTC fare per person (Round Trip) to non-Central
Government employees, shall be allowed income-tax exemption subject to
fulfilment of conditions...," the statement added.
Like in the
case of central government employees, the exemption to other category
will only be extended if an employee exercises an option for the deemed
LTC fare in lieu of the applicable LTC in the block year 2018-21. Also,
the employee will have to spend three times of the value of the deemed
LTC fare on purchase of goods/services which carry a GST rate of not
less than 12% from GST registered vendors through digital mode. The said
spending will have to be made during the period from the 12th of
October, 2020 to 31st of March, 2021.
The tax exemption and the
amount of cash equivalent of LTC will reduce proportionately if the
spent is less than three times the actual value.
Further, as this
exemption is in lieu of the exemption provided for LTC fare, an
employee who has exercised an option to pay income tax under
concessional tax regime under section 115BAC of the Income-tax Act, 1961
shall not be entitled for this exemption.
Through the LTC
consumption boost plan for non-government employees, the government
expects a demand generation of Rs 28,000 crore in the economy.
The total demand generation, including the measures announced earlier in the month, is estimated at over Rs 1 lakh crore.
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