The Finance Minister of India Mrs.Nirmala Sitharaman, in a press conference today, announced a scheme offering tax-exempt payment of leave travel concession/allowance to encourage government and private sector employees to spend more and generate demand. FM also announced that the Govt to give Rs 10,000 special festivals advance to all its employees as a one-time measure to stimulate demand in the economy Travel Payout, Festival Advance. According to the government, measures announced by the government today along with the participation of states and the private sectors, are, , projected to create “additional demand” of Rs 1 lakh crore in the economy. FM said supply constraints in the economy have eased, but consumer demand is still affected. Some proposals are aimed at advancing expenditure while others are “directly linked to an increase in GDP (Gross Domestic Product)”, she said.
Here’s all you need to know about the leave travel concession (LTC) cash voucher scheme:
Central government employees get leave travel concession in a block of four years–one each to a destination of choice and home town or two for home town. Under this, the air or rail fare is reimbursed as per pay scale/entitlement. Also, leave encashment of ten days (pay+dearness allowance) is paid. Under the scheme, government employees can opt to receive cash amounting to leave encashment and they will have to buy goods and services worth three times the fare and one time leave encashment, and do so before March 31, 2021, to be exempted from income tax for the money received. Payment should be only through digital mode and provide a GST invoice of at least 12 per cent for the purchase. For example, if an employee receives Rs.50000/- as reimbursement of LTC encashment, then he has to spend Rs.150000/- through digital payment which attracts GST of 12% or more, failing which the amount received will be included for computation of income tax.
The finance minister said the scheme would cost Rs 5,675 crore if central government employees opt for it. However, for PSB and PSU employees, its cost would be Rs 1,900 crore.