In a major relief for lakhs of salaried class people including Central government employees, the Centre has said that its staffers will not have to pay income tax on the amount received against the leave travel concession (LTC). In Budget 2021, Finance Minister Nirmala Sitharaman has proposed to provide tax exemption on cash allowance in lieu of Leave Travel Concession (LTC).
The scheme was announced by the government last year for individuals who were unable to claim their LTC tax benefit due to covid-related restrictions on travelling. The Centre has extended this income tax relief for all salaried taxpayers for the four-year cycle of 2018-21.
"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," Nirmala Sitharman said in her Budget speech.
On October 12, the scheme was first announced for government employees. However, later it was extended to cover non-government employees as well.
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."
A government 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. Also, only digital transactions are allowed and GST Invoice have to be produced.