How can you claim tax benefits from the LTC Cash Voucher Scheme??
On 12th October 2020, the Government of India announced the LTC (Leave Travel Concession) cash voucher scheme, a concession scheme that allows a tax payer to become eligible for tax benefits under the Leave Travel Concession without actually having to travel. These benefits are conditional to the tax payer incurring a specific amount of expenditure and insurance premium payments are included in this expenditure.
The COVID-19 pandemic and the nationwide lockdown that followed disrupted most of our travel plans. Because of which many of us were unable to utilise the Leave Travel Concession (LTC) benefit available in our salary structures. Therefore, the government decided to introduce this scheme to give this benefit to the tax payers.
So, how does the LTC Cash Voucher Scheme work?
To avail the benefits of this scheme, you need to:
- Purchase goods/services with a GST rate of 12% or more. The payment must be done via a digital mode or cheque, demand draft or NEFT/RTGS. It is mandatory to provide a GST invoice of the purchases to claim the tax-exemption.
- Spend 3 times the value of the LTC component, and
-
The spends must be incurred between 12th October 2020-31st March 31 2021.
You can claim a maximum deduction of Rs.36,000 per person. If the actual spends is less than 3 times the value of the LTC fare the deduction will be calculated on a pro-rata basis.
- Employees who have opted to pay income-tax under Concessional Tax regime under Section 115BAC of Income-tax Act, 1961, are not eligible for Tax exemption.
Note: This scheme is applicable for the unutilised LTC fare during the Block year 2018-21.
LTC Terms and Conditions To Avail Benefit on Buying Life Insurance
Insurance payments can be considered under the LTC Cash Voucher Scheme with certain terms and conditions:
- Only Life insurance Policies which suffer a GST of not less than 12% shall be eligible.
- Individual has to invest a minimum of 3 times the LTC entitlement in Life insurance premium in order to get the tax exemption & maximum exemption shall be Rs.36,000 per person(basis the category of employees), else the exemption shall be proportionate
- Only new policies sold during the period 12 October 2020 to 31 March 2021 will qualify for the benefit
- Payment of premium must be made only through digital mode for claiming tax exemption
Are you considering buying a Life Insurance plan but not sure which one to buy? Get in touch with our financial advisor now to understand how life insurance can help you financially plan for your life's milestones. Pick the most suitable life insurance plan based on your life stage and also avail tax benefits with your premium payments under the LTC cash voucher scheme.
Disclaimers:
1. Tax benefits are as per the Income Tax Act 1961 and are subject to any amendment made thereto from time to time. You are advised to consult your tax consultant
Comments