Under the LTC cash voucher scheme, the government employees are eligible to purchase goods and services in lieu of the tax-exempt portion of the LTC benefit they receive. They can purchase any goods or services that have a GST rate of 12% or above associated with them under the LTC scheme. This needs to be done between October 12, 2020, and March 31, 2021, to become eligible for reimbursement under this special cash voucher scheme.

The payments for purchasing goods or services under the LTC scheme need to be made either digitally or through cheque, Demand Draft (DD), NEFT, or RTGS.

As per the finer details of the LTC scheme, premiums paid for life insurance policies during October 12, 2020, and March 31, 2020, are eligible for reimbursement. The employees need to submit original bills or the self-attested copies as asked by their department to benefit from the LTC scheme.

The Expenditure Department also clarified that the payment of premiums for existing insurance policies is not covered under the LTC scheme. Those who want to benefit from the LTC scheme but will superannuate before March 2021 need to submit the bills of expenditure before the date of superannuation.

It means employees can claim multiple LTC scheme benefits through life insurance plans. They can protect their families' financial future while also getting tax exemption on the life insurance premium.

There are several benefits of LTC scheme for employees under central and state government employees.

• The LTC cash voucher scheme is meant to encourage employees to avail the LTC for the current four-year block ending 2021, which will otherwise lapse if not available on travel expenses.
• They will receive a cash payment under the LTC scheme, which includes full payment of leave encashment and tax-free fare payment as defined in the three flat-rate slabs.
• The admissible payment under LTC scheme will be restricted to the total package of an employee, i.e., deemed fare and leave encashment as admissible under LTC rules.
• TDS will not be deducted when an employee reimburses the benefits as defined under the LTC scheme.
• The benefits of this special cash voucher scheme will be settled within the current financial year provided the invoices of purchases of goods/services are submitted on time.
• The allowance payable under LTC scheme is non-taxable as per the defined criteria.

The following example illustrates how the benefits of LTC cash voucher scheme are calculated –

Mr. Shah, being a government employee, is eligible for a deemed LTC fare of Rs. 20,000 per person. For a family including his spouse and two children, the total deemed LTC fare equals Rs. 80,000. As per the LTC scheme conditions, he has to spend Rs. 2,40,000 and above to redeem full fare and income-tax exemption.

However, if he chooses to spend Rs. 1,80,000, he will be entitled to get the LTC scheme benefits on a pro-rata basis. Hence, the reimbursement under LTC cash voucher scheme would be one-third of the total LTC fare, i.e., Rs. 60,000.

Besides getting the reimbursement of purchases, the employees also benefit from LTC scheme in terms of tax savings. Consider the following example to know more about the tax benefits of LTC scheme –

Mr. Ghai earns an annual salary of Rs. 20 Lakhs along with an additional income of Rs. 1 Lakh. His total taxable income with or without getting LTC scheme benefits are as follows:

Axis Max Life Insurance is dedicated to maximizing the benefits received by our policy buyers. We offer our term insurance plans to employees who want to build a financial cover for their family and get the benefits defined under the LTC scheme.

All salaried employees who qualify for LTC benefit can buy any Axis Max Life Insurance Plan. The premium payment receipt can be used to claim tax exemption under the LTC scheme along with deductions under 80C. You can use our online premium calculator to begin term insurance purchase process.