Tax Query: How can I claim tax exemption under the LTC cash voucher scheme?

I am planning to buy household electronic goods worth Rs 60,000. My employment is in the private sector, and my LTC component is Rs 30,000. Can I claim tax exemption under the LTC cash voucher scheme?

The government recently launched an LTC cash voucher scheme to enable employees to claim LTC exemption. The conditions for exemption are:

1. The employee exercises the option in the place of their LTC exemption entitlement; 
2. The spending should be three times the value of the LTC component;
3. The goods or services purchased should carry a GST rate of 12% or above; 
4. The purchase should be from GST registered vendors or service providers and furnish a GST invoice;
5. The payment should be through digital mode;
6. The employee must be entitled to claim LTC exemption for FY 2020-21; 
7. The employee’s LTC entitlement should be not more than Rs 36,000 per person for a round trip: and
8. The amount can be spent anytime from 12 October 2020 to 31 March 2021.

An employee who spends less than three times the value of the LTC component gets a reduced exemption in the proportion of the spending. In your case, you can claim a complete exemption if you spend Rs 90,000 (Rs 30,000*3). However, the LTC tax exemption is proportionately reduced to Rs 20,000 (30,000*60,000/90,000).

Also Read: Tax Query: What is the new criteria to file ITR if annual income is below taxable limit?

I spend Rs 2,000 per month on my mobile phone charges and internet connection at home. I receive an allowance of Rs 2,500 per month as part of my salary. Can I claim tax exemption on the reimbursement of mobile and internet charges?

You should submit the bills or invoices for the monthly mobile and internet charges. Your employer will reimburse the expenses based on the bills or invoices and provide tax exemption. The tax-exempt amount is lower of:

1. The actual amount of the reimbursement to the employee;
2. The allowance provided to the employee.

The tax-exemption calculation is for a financial year. Your tax exemption is the amount you claim for the full financial year or the actual allowance, whichever is lower.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in.

Sweta Dugar

I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.