During the first wave of COVID-19 in 2020, the government had announced certain measures to help leading taxpayers. This includes tax exemptions from their Leave Travel Allowance (LTA) balance.
Usually, taxpayers are able to claim tax benefits from the LTA on a holiday delivered anywhere within India. However, due to epidemics and occasional difficulties, taxpayers were unable to leave. In such cases, they may have to pay tax on the LTA portion of their income. To help paid taxpayers avoid this, the government has announced the LTA cash voucher scheme. The program will be announced on May 5, 2021.
What is the LTA cash voucher program?
Under the LTA cash voucher system applicable to FY 2020-21, those who have a LTA share in their income, can save taxes by using a ‘specified amount’ for certain goods, without having to make a specific trip.
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Let’s see in detail how this program works. The taxpayer or a member of his or her family should have received the ‘defined expense’. It should be used for purchasing goods and services with a GST rate of 12 percent or more. Purchases were to be made between October 12, 2020 and March 31, 2021. Also, the release should not exceed Rs 36,000 per person or one third of the ‘expenditure’, whichever is less. Payment of expenses should be made electronically to the GST registered business and must obtain a ‘GST tax invoice’.
Typically, LTA can be sought as a double release on a four-year blockchain block, a continuous block from 2018 to 2021. The discovery of the LTA program can be seen as the need for another journey in that four-year block. Therefore, taxpayers can apply for this option only once during the four-year blockade period from 2018 to 2021.
How do I apply for this release?
Employers are required by law to deduct TDS before paying your salary. Your employer would have deducted TDS from your FY 2020-21 salary. Some employers were unable to approve the LTA voucher program because it was not notified at the time when they were required to withdraw TDS FY 2020-21. If you have not been able to claim the LTA program through your employer, you can claim it at the time of completing your tax return. Make sure you meet all the conditions and report the LTA waiver you want to claim on your tax return. You must also keep all supporting documents: a tax invoice and proof of payment. If you require this program at the time of completing your form, you will be able to apply for a refund of the TDS deducted from the LTA balance (in accordance with the eligibility policy mentioned above).
Most employers would have already done one of these two things – TDS deducted from your LTA balance and paid you as FY 2020-21 salary or allowed you to continue with the LTA balance for the next financial year to apply. Also, it is important to note that those who have opted for a new tax regime will not be eligible for the scheme.
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If you have purchased a cell phone, AC or refrigerator within the allotted time, you can apply for your LTA as a discharge assuming you meet all of the above conditions, as all of these items attract a GST rating of 12% or more.
