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  • Category: Tax Planning

    LTA exemption if we pay GST @12% or higher while buying things.


    Do you have a query about LTA exemption in case of GST beyond 12%? Searching for detailed reasons to understand the exemption in layman language? You can scroll through this Ask Expert page and understand if this information is authentic.

    I have heard somewhere and searched on internet for Salaried Employee LTA exemption due to Covid Pandemic.
    Generally LTA is exempted based on Travel. But due to Covid, travelling is reduced and Government has declared some alternate way to claim LTA under GST. If we pay @12 % or more GST for products, that can be claimed under LTA exemption for Private Sector Employee.
    Can someone help to understand this exemption in detail having simple language so that non-financial person can understand it?
    Also let me know is this news are authentic?
  • Answers

    4 Answers found.
  • Due to the Covid-19 pandemic, people are able to undertake any journey with the family. because of this, many employees are not able to claim their leave travel allowance (LTA). To give some leverage to such employees and at the same time to give a boost to GST (Goods and Service Tax) collection, the government announced a scheme for availing LTA. This announcement came on the 12th of October 2020 for the Central government employees. Then on the 29th of October 2020, the same is extended to all other employees.
    As per this one can claim LTA if he spends some money on the purchase of goods or services attracting GST. For claiming the same the following conditions are to be satisfied.
    1. you have to spend an amount equal to the amount of leave entitlement on the purchase of goods or services for claiming your LTA.
    2. If you want to claim LTA exemption for income tax you have to spend at least three times of the value of their LTA entitlement.
    3. You have to buy goods and services from a seller who is registered under GST, and GST @ 12% or higher is payable on such goods or services.
    4. You have to pay the money through digital mode only. If you pay cash or through cheque, the benefit can't be claimed.
    5. You have to submit the original copy of the tax paid invoice to the employer.
    6. You can claim only a part also if you are not able to spend the full amount. you will get the benefit proportionately.

    This is a good proposal for the employees who really want to purchase some goods for their use. They can purchase the goods, claim the LTA and claim IT exemption also. But going for this claim by purchasing goods unnecessarily will not give you any benefit. So don't go for needless purchases for claiming this. Purchase the required goods only and then claim proportionately.

    drrao
    always confident

  • Due to the Covid-19 pandemic, Govt has launched a special scheme of LTA claim as LTA tax exemption for all the employees, Govt or private. This scheme was launched on 12th October 2020 for the central Govt employee but later on 29th October, it was announced for all the employees entitled for LTA. This is authentic news.
    Earlier, in LTA scheme there was a provision for deduction of money in Income Tax return, spent on travelling by the employee. Now due to Covid situation, people cannot travel, so, Govt has allowed people to buy goods or services for which GST of 12% or more is also paid and claim LTA exemption for the LTA admissible amount.
    The current LTA block is 2018 to 2021 (4 years block) under which an employee could go on travel within India two times and claim LTA exemption in Income Tax.
    As per the scheme the employee has to spend at least three times of the value of their LTA entitlement. Now the interested employee has to buy goods and services or which GST is 12% or more. Another thing is that the payment is to be done through digital mode and not by cash or cheque.
    Let us understand it with an example. The limit of LTA per person is Rs 36,000. Suppose your family comprises of 4 persons then your LTA entitlement is 4 x 36000 = Rs 1.44 lakh. Now you have to spend three times of it means 3 x 1.44 = Rs 4.32 lakhs to avail the exemption of Rs 1.44 lakh in taxable income.
    So you can buy some items which you were planning for long but were not able to decide. Now it is an opportunity to buy items and claim the amount limited to the admissible LTA as exemption in Income Tax return.

    Knowledge is power.

  • LTA cash voucher scheme for non-central employees has been announced and the same is available from 12th October 2020 to 31 March 2021. The scheme is authentic and is subject to certain conditions to which one must adhere to get the benefits of cash in lieu of LTA. Employees can get the benefit even without traveling.

    1. The payment of cash allowance in place of LTA/LTC is fixed at a maximum of Rs 36000 per person (round trip).

    2. An employee can claim the LTC/LTA benefit for the block year 2018-21.

    3. To claim the cash benefit an employee must spend 3 times the LTC value and 1 time the leave encashment amount. For E.g. if LTC for 1 person is 25000 then for a family of 4 the LTC value will be 25000 X 4 = Rs 1,00,000. The employee must spend Rs 100000 X 3 = Rs 300000 + Leave encashment for 1 month to claim the benefit.
    The leave encashment will vary as per the salary component of the employee.

    4. The amount to be spent should be on non-food items (White goods) i.e. food items will not be considered for claiming the benefit.

    5. The goods purchased should be at GST rate of 12% and above.

    6. The goods should be brought from a GST registered vendor and a proper invoice should be collected for the same.

    7. The payment shall be made through digital mode and no cash payment will be eligible for claiming the benefit.

    8. If the employee does not spend the entire amount then the exemption to him will be proportionately reduced. For e.g. if the eligible amount is Rs 100000 and the employee is to spend Rs 300000 + Leave encashment amount and the employee spends only Rs 150000 + Leave encashment, then the cash allowance will be provided to the extent of Rs 50000 only and not Rs 100000.

    9. If an employer provides advance LTC/LTA to an employee and the employee fails to fulfill the conditions then he must return the money back to the employer.

    The scheme was initially for only central and state-owned enterprises which has now been extended to private sector employees too.

    Live before you leave.

  • Can someone help me to clarify below points related to LTA Income Tax exemption?
    Can we submit bills for any item/thing bill for LTA which is having 12% or more GST?
    Is it required, submitted bill should be in favor of submitter name or any one's name in Family or Friends?
    Can we submit bill of GST paid for new House, if paid GST is 12% or more?
    Can we submit bills from April 2020 or from when this rule declared?

    Thanks & Regards,
    Nilesh Patel


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