7th Pay Commission latest news today: No need not to pay income tax on this amount received by Central government employees
7th Pay Commission latest news today: Salaried class including central government employees need not pay income tax on the amount received against LTC (Leave Travel Concession).
7th Pay Commission latest news today: Salaried class including central government employees need not pay income tax on the amount received against LTC (Leave Travel Concession). The finance minister Nirmala Sitharaman made the announcement in this regard in the Budget 2021. The center had given this income tax exemption to the central government employees on 12th October 2020 (FY 2020-21) in the wake of COVID-19 pandemic. Since the Chinese virus is still around, the center has extended this income tax relief for all salaried taxpayers for the four year cycle of 2018-21.
Announcing the relief for all salaried taxpayers Nirmala Sitharman said in her budget speech, "In order to provide relief to employees, it is proposed to provide tax exemption to the amount given to an employee in lieu of LTC subject to incurring specified expenditure."
Benefit for central government employees
The biggest incentive for central government employees to avail the LTC Cash Voucher Scheme is that in a four-year block ending in 2021, the LTC not availed will lapse, instead, this will encourage employees to avail of this facility. An employee, opting for this scheme, will be required to buy goods or services worth 3 times the fare and 1 time the leave encashment before 31st March 2021. The items bought should be those attracting GST of 12 per cent or more. Only digital transactions are allowed and GST Invoice have to be produced.
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Conditions to avail this benefit
If an employee opts for this in lieu of one LTC in the Block of 2018-21, here are the major conditions that he or she must fulfill to avail this income tax exemption benefit:
1] The employee spends the money of a larger sum than the entitlement on account of LTC on actual expenditure.
2] Cash equivalent of full leave encashment will be allowed, provided the employee spends an equal sum. This will be counted towards the number of leave encashment on LTC available to an employee.
During the Coronavirus spread leading to lockdown across India, the central government had announced a Cash Voucher Scheme for the central government employees as they were unable to travel and claim the LTC benefit. In that case, the government vision behind the move was to give the amount in lieu of the LTC to the employees. they thought, it will give more liquid into the hands of the central government employees.
Now, since the move has been acclaimed by central government servants, the Government of India (GoI) has now extended this Cash Voucher Scheme to all salaried taxpayers that includes central government servants too.
After the Cash Voucher Scheme notification, the central government employees and other salaried taxpayers will be given full payment on Leave encashment and tax-free payment of LTC fare in 3 flat-rate slabs depending on the class of entitlement.
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