7th Pay Commission: Update on LTC and income tax for CG employees
New Delhi, Feb 04: In some good news relating to the 7th Pay Commission, the salaried class including the Central Government employees need not pay income tax on the amount received against LTC or Leave Travel Concession.
In her budget speech, finance minister, Nirmala Sitharaman made the announcement. The Centre had given the T exemption to CG employees on October 12 2020 in the wake of the COVID-19 pandemic.
Since the pandemic is still on, the Centre extended the IT relief for all salaried taxpayers for the four year cycle of 2018-21.
Sitharaman said, 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.
For CG employees, to avail the LTC Cash Voucher Scheme is that in the four year block ending in 2021, LTC not availed will lapse. This would encourage employees to avail 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 enchantment done before March 31 2021. The items purchased should be those attracting GST of 12 per cent of more. Only digital transactions are allowed and GST invoice has to be produced.
The employee spends the money of a larger sum than the entitlement on account of LTC on actual expenditure. 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 are the conditions to avail this benefit.