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The government while relaxing the cash encashment condition under the LTC cash voucher scheme, has also enabled it for the Central government employees to buy a new insurance policy with the scheme.
In an office memorandum, Expenditure Department of the Finance Ministry has said that as the scheme involves expenditure on purchasing goods and services with GST rate of 12 per cent or more between October 12, 2020 and March 31, 2021, payment of premium of existing insurance policies does not fall under the category. However, payment of premium for insurance policies purchased during the period between October 12 and March 31 is eligible for reimbursement of the scheme.
This could give added benefit to an officer/employee. First, he/she would get some amount (equivalent to deemed return fare) as tax free and then using that after adding some from own pocket for buying new insurance policy, he can claim for tax benefit under section 80 C of the Income Tax Act for a premium amount, subject to ceiling of ₹1.50 lakh.
In order to boost consumer demand and facilitate availing LTC (Leave Travel Concession) without travelling anywhere, the Centre announced a new scheme on October 12. It prescribed using LTC for the block period of 2018-21 by buying goods/services having GST rate of 12 per cent or more and expending three times of deemed LTC fare along with an amount equivalent to 10 days of leave cash encashment.
It said: “An employee can avail the scheme utilising the applicable LTC fare without opting for leave encashment. Leave encashment is an option.” Deemed return fares for the scheme have been fixed at ₹36,000 (those eligible for business class air travel), ₹20,000 (those eligible for economy class air travel) and ₹6,000 (those eligible for train journey). An officer or employee needs to spend three times of this fare per eligible person.
Leave encashment
In case of an employee opting for only deemed fare without leave encashment and spending less than three times of the deemed fare, the reimbursement in this case would be on a pro-rata basis.” Since in order to claim the applicable deemed fare, an employee is required to spend three times of the deemed fare, the reimbursement in the case of expenditure less than the prescribed three times would be 1/3rd of the actual expenditure,” it said. It also clarified that the number of leave encashment for LTC (10 days or less than 10 days) is to be in accordance with the relevant provisions of LTC.
The memorandum made it clear that there is no need to submit original bills related to purchase of goods or services as it may be required for claim of warranty. “Self-attested photocopy would be sufficed,” it said, adding that original bills may be produced on demand for information. In case of an employee retiring before December 31, 2020, bill/voucher needs to be submitted and settled before the date of superannuation.
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