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How you can claim LTA cash voucher exemption while filing returns

The government announced the LTC (Leave & Travel Concession) cash voucher scheme in October 2020. This allowed salaried individuals eligible for LTC/LTA to claim the tax exemption without travelling. As Covid-19 lockdown made travelling impossible, through cash LTC voucher scheme,
employees in public and private sectors were allowed to tax exemptions by purchasing goods and services instead of as per the scheme’s conditions.

Under the scheme, taxpayers who have LTA/LTC in their salary packages were allowed to purchase goods and services in lieu of the tax-exempt portion of the Leave Travel Concession or Leave Travel Allowance.  To avail of the tax exemption benefits, taxpayers are required to either purchase goods or services that are 3 times the amounts that would be claimed as a concession in respect of travel tickets. The spending has to be done through the digital mode between October 2020 and March 31, 2021, on goods and services that attract GST of 12% or more. The employee shall obtain a cash voucher indicating the GST number and the amount of GST paid

The facility, however, is not applicable to employees who have opted for the new tax regime, in which tax rates are lower but you let go of most deductions and exemptions. Also, the taxpayer should not have already exhausted the LTC exemption for the block (current block is 2018-21). Every taxpayer can claim leave travel allowance (LTA) exemption for two journeys in a block of four years.

If you opted for LTC Cash Voucher Scheme in FY2020-21, here’s how you can claim the money received under it as tax exempt while filing your Income Tax Return (ITR).

Amount claimed

Taxpayers can claim upto one-third of the amount spent on good and services per family member or upto Rs 36,000 per person,  whichever is lower. For example, if a taxpayer purchased a laptop of Rs 39,000 (GST of 18%) then tax exemption on same would be lower of 39,000/3= 13,000 or 36,000. Therefore, in the above example, tax exemption of upto Rs 13,000 can be claimed. Thus a family of 4 claim an exemption of Rs 1.44 lakh. However, no exemption will be given if such a purchase is made in cash as the mode of payment has to be online.

How to claim exemption

Employer will not deduct the tax from your salary on expenditure incurred in lieu of LTA/LTC if the bills are submitted by you. This amount will be shown claimed as tax-exempt in Form 16. Tax exemption under LTA Voucher scheme shall be claimed under section 10(5) of the Income-Tax Act, 1961.



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