[gopaneel]

I remember reading sometime back that the government had allowed Central Government employees to claim tax exemption on purchases in lieu of Leave Travel Allowance (LTA). I did not pay much attention to it back then. One of my friends mentioned yesterday that the scheme was also available to private sector employees. It seems purchase of products/services from October 2020 to March 2021 with GST more than 12% can be claimed in place of LTA.

My friend says this meant car purchases can also be claimed and I thought it could be a good option to save on tax. I did a quick search on team-bhp and saw only the following post: All Income Tax Queries (refunds, disputes, rates etc...)

I understand the scheme has to be extended by the employer as well. In my case, while I did purchase a car in December, my company has still not allowed submission of claims under this.

I wanted to bring this up again in the forum, for all those who've made large purchases and were not aware of the scheme like me. Also, would like to hear from those who have made claims under this.

Some more information available here.

[arun_josie]

Originally Posted by gopaneel

I wanted to bring this up again in the forum, for all those who've made large purchases and were not aware of the scheme like me. Also, would like to hear from those who have made claims under this.

I didn't claim, but below were the instructions shared with us to claim LTA under this scheme,

1. Bills/invoices carrying 12% of GST or more than that can be claimed for exemption. Less than 12% of GST bills are not allowed to claim exemption.
2. Bill should be in the name of that particular individual
3. GST number of the supplier should be there in the bill
4. GST rate should be 12% or more
5. You need to submit bills only from 12th Oct 2020.
6. To claim this benefit, employee will need to submit purchase invoice for a value 3 times to the LTA amount standing to his credit until March 2021. For Example if you allocate 2000 Rs. in December & until March 2021 your total LTA allocation will come up to Rs.8000 (Rs.2000 *4) , hence your purchase invoice should be for a minimum Rs.24,000 (Inclusive of Applicable GST)

[condor]

Originally Posted by gopaneel

... the scheme was also available to private sector employees. It seems purchase of products/services from October 2020 to March 2021 with GST more than 12% can be claimed in place of LTA. .

You could claim it when filing tax returns. From what I remember, you would need to spend about 3x 36k x num of family members, and this would be applicable for the standard block of 2 years.

Amazon even had a promotion running for this.

But I dont have further details. There was a published note on a IT / govt website.

[JithinR]

Originally Posted by arun_josie

To claim this benefit, employee will need to submit purchase invoice for a value 3 times to the LTA amount standing to his credit until March 2021.

In my organization it doesn't have to be 3 times the LTA amount. If your expense falls short of this amount then they will calculate it on a pro-rated basis. I think this was a relaxation provided later by the government (you can find articles online that say so) but I am not able to find the actual notifications regarding this.

Originally Posted by condor

You could claim it when filing tax returns. From what I remember, you would need to spend about 3x 36k x num of family members, and this would be applicable for the standard block of 2 years.

36k amount is probably the maximum deemed fare. I believe its dependent on the LTA you have declared with your employer.

[fordday]

Every year I declare 40-50k as LTA to my company. Normally this covers my air tickets to home town. Whatever the actual ticket fare produced is tax free and any balance amount is taxable.
I submit as per rule - twice in a block of four years.

This time our company is offering the GoI scheme. More details are yet to come but the conditions mentioned like three times the spending, 12% GST, invoice in one's own name are there.

Assuming I submit bills for the bought furniture for 60k, I will receive one third of 60k = 20K as taxfree under the scheme and the rest 30k as taxable income.

[ramki.grandhi]

As per the guidance given at my company, at max we can save 30% of 36k, i.e. ~11k. To save this much, we've to submit bills worth of 80k*3 = 2.4 lacs.

[comfortablynumb]

What a coincidence, I submitted a claim (for mobile phone and washing machine purchases) under this scheme just yesterday, and saw a thread on it today. Sharing the guidelines sent by my employer below:

1. Scheme is applicable for the employees eligible for LTA as a part of their CTC.
2. LTC scheme is applicable from October 12, 2020 to March 31, 2021.
3. If an individual has already claimed LTA twice in the current block of 4 years (2018-2021) then he is not eligible to claim for the LTC scheme this year.
4. An employee need not take leave nor undertake any travel to claim under the scheme. This scheme is in lieu of LTC travel (Deemed LTA).
5. Employee will get full exemption up to LTA entitlement subject to 3 times spending on purchasing goods / services. If employee spends less than 3 times of entitlement then the benefit will be provided on pro-rata basis.
6. The same bill / invoice submitted under various other payroll reimbursement categories should not be claimed under LTC scheme.
7. Purchase of goods / services should carry a GST of 12% and above.
8. GST invoice is mandatory, and the invoice should be in the name of the employee only.
9. Multiple bills are accepted. The purchase should be done from the date of issue of the scheme order dated October 12, 2020 till the end of the financial year.
10. All the payment should be made by the employee in the digital / electronic mode. Cash / Cheque transaction, handwritten invoices are not eligible to claim for the exemption.
11. In case, if the LTC benefit availed, then the same bill / invoice cannot be claimed in other Income Tax sections or vice a versa.
12. LTC scheme is not applicable to the employees who have opted for the New Tax Regime.
13. Product / services can be purchased through E-Commerce portals also.

Example 1: Full spending, Full exemption
LTA Amount = Rs. 60,000/- (CTC Component)
Amount Spent = Rs. 180,000/- (3 times Spending)
LTA Exemption = Rs. 60,000/-

Example 2: Exemption on pro-rata basis, if spending is less than 3 times LTA
LTA Amount = Rs. 80,000/- (CTC Component)
Amount Spent = Rs. 180,000/- (75% Spending)
LTA Exemption = 80000*75% = 60,000/-

Example 3: Exemption on pro-rata basis if spending is less than 3 times LTA / Less than LTA entitlement
LTA Amount = Rs. 60,000/- (CTC Component)
Amount spent = Rs. 45,000/- (25% Spending)
LTA Exemption = Rs. 60000*25% = 15,000/-

[concorde24]

Originally Posted by condor

You could claim it when filing tax returns.

Typically LTC needs to be approved by employer and should appear in Form 16, please check if cash voucher can be claimed directly.

Originally Posted by JithinR

36k amount is probably the maximum deemed fare. I believe its dependent on the LTA you have declared with your employer.

36k is the maximum deemed fare per person. We can go upto number of dependants * 36k OR maximum LTA available for the employee.


Please check with your employer for both points.

[Weathered]

My employer takes the tax savings proofs for the financial year by January 15th. I had not opted for LTA as a component of the FBP at the beginning of the financial year. After seeing the LTC scheme, requested with my employer if I can declare it now & submit proofs as well as I had purchases done in November. They refused saying I can't claim it now as I had not declared LTA component at the start of the financial year. My argument was since this was unknown back then and it's been introduced now, make an exception to the guys who haven't declared upfront to submit bills and claim LTC but they didn't budge.
Since LTC cash voucher scheme accepts the tax proofs till March 31st, checked if i can claim the benefits in ITR directly. It looks like LTA/LTC claims can only be claimed via employer.

[Vipin Kumar]

I have opted for this scheme, though not for buying cars. Two of my colleagues have used this scheme for buying cars. But we are in public sector.

Yes, the payment has to be made by digital mode -- net banking, neft, rtgs, imps, debit card, credit card swiping, etc. No cheque, cash, transactions (though I don't understand why cheque payments are unacceptable).

I am not too sure about printed-head invoices in which some columns are filled in handwritten way. A fully handwritten invoice may be unacceptable. I am only looking at the basic govt order. I don't know whether private sector is adopting further conditions.

[dhanushmenon]

Originally Posted by arun_josie

I didn't claim, but below were the instructions shared with us to claim LTA under this scheme

Originally Posted by comfortablynumb

What a coincidence, I submitted a claim (for mobile phone and washing machine purchases) under this scheme just yesterday, and saw a thread on it today. Sharing the guidelines sent by my employer below:

Valuable and comprehensive instructions. One additional point:-
A digital receipt or bank statement indicating the expense is mandatory while submitting claim.

[autotranny]

Originally Posted by Vipin Kumar

I have opted for this scheme, though not for buying cars. Two of my colleagues have used this scheme for buying cars. But we are in public sector.

Interesting; while the cap on spend per person at Rs.36,000 is common for both Public and Private sector, the significant difference is that in Public Sector, the LTA is an actual perk over and above the salary, whereas in Private Sector (especially the modern companies), LTA is only a means to save on Income Tax and is carved out from the Fixed Pay agreed at the beginning of the year.

Net effect, is that a Govt employee (with wife and 2 kids), gets upto Rs 1.44 Lacs (36x4) effective discount on purchase of a car (min purchase price 4.32 Lacs)

At the same time for a Private Sector employee buying the same car, he can claim tax exemption on this Rs 1.44 Lacs, that translates into a max benefit of Rs 40,000 (assuming he is in the highest tax bracket).

[condor]

Originally Posted by autotranny

Interesting; while the cap on spend per person at Rs.36,000 is common for both Public and Private sector, the significant difference is that in Public Sector, the LTA is an actual perk over and above the salary, .

Long back, pvt sector companies used to structure salary the same way, but moved to a CTC method of calculation. The reason for difference is there.

[Vipin Kumar]

Originally Posted by autotranny

Net effect, is that a Govt employee (with wife and 2 kids), gets upto Rs 1.44 Lacs (36x4) effective discount on purchase of a car (min purchase price 4.32 Lacs)

At the same time for a Private Sector employee buying the same car, he can claim tax exemption on this Rs 1.44 Lacs, that translates into a max benefit of Rs 40,000 (assuming he is in the highest tax bracket).

It translates as clear discount, and this amount (Rs 36000 x 4) is not taxable also. But, apart from this, the employee must claim earned-leave encashment for ten days also, which may come to another 80000 to 1 lakh, depending on salary drawn. This component, however, is taxable at source. This component, again, needn't be multiplied into three times while spending, unlike the component of 36K.

It means that the private sector has organized this in a very different way.

These figures are of the highest salary bracket. Just below is Rs 20000 per head instead of Rs 36000.

The govt anyway is not at any real loss. It gives you 36000 and asks you to make purchases for a min of 108000. If you buy a car or some AC units, you pay tax at 28%, which means the govt recovers significantly more than what it gives you. From the other component, it already takes the tax at 30%, and when you utilise that component (@ pre-TDS total), you have to give another 12% GST minimum So, out of say 1 lakh INR, you have to give a tax of minimum Rs 43200 (31200 + 12000).

All the while, it gives a considerable discount on purchases that you make. No doubt about it.

If the govt gives the usual LTC to employees, it will have to spend much more than these figures on its employees.

[sunilsreenivasg]

I was able to claim through company portal. 1/3rd of the total amount spent is exempted from tax, provided you have the LTA amount defined in your CTC. Again max would be 36k per person. All private employees can avail this. Minimum bill amount should be 5000 with a GST of 12% and higher.
All online purchases with the pre-requisite conditions can be claimed. Also, a proof of digital payment must be produced mostly like a credit card statement or bank statement.