The government announced various relief measures for paid taxpayers during the first wave of COVID-19 in 2020. The ability to claim a tax exemption on their Leave Travel Allowance (LTA) balance was one of them.

In most cases, taxpayers can claim a tax benefit on LTA for a vacation they took anywhere in India. Taxpayers, on the other hand, were unable to travel due to the pandemic and occasional lockdowns. They may be required to pay tax on the LTA component of their salaries in such instances. The government announced an LTA cash voucher programme to help salaried taxpayers avoid this dilemma. This scheme has been notified on May 5,2021.

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What is the LTA cash voucher scheme?

Those with an LTA component in their wage can save tax on taxes by spending a “determined amount” on particular goods without having to travel under the LTA cash voucher programme, which is in effect for FY 2021-21.

Let’s take a closer look at how this system works. The’sepcified expense’ should have been incurred by the taxpayer or a member of his or her family. It should have been used to buy goods and services having a GST rate of at least 12 percent. Between October 12, 2020 and March 31, 2021, the transaction should have been done. Furthermore, the exemption cannot exceed Rs 36,000 per person or one-third of the’specified expenditure,’ whichever is smaller. Payment for the costs should have been made to a GST-registered firm via electronic methods, with a ‘GST tax invoice’ available.

LTA can usually be claimed as exempt twice in a four-year period, with the current period running from 2018 to 2021. Using the LTA plan would entitle you to one of the four trips in the four-year period. As a result, taxpayers can only use this option once during the four-year period between 2018 and 2021.

How can one claim this exemption?

Employers are required by law to subtract TDS from your wage before paying you. TDS would have been withheld from your salary income for FY 2020-21 by your employer. Because the LTA voucher programme was not announced at the time they were needed to deduct TDS for FY 2020-21, several employers were unable to accept it. If you haven’t been able to take advantage of the LTA plan through your company, you can do so while completing your income tax return. Make sure you complete all of the requirements and properly report the LTA exemption you wish to claim on your income tax return. You should also keep all supporting documents, such as the tax invoice and payment evidence. You will be eligible to claim a refund of TDS deducted on the LTA amount if you utilise this scheme while completing your return (as per the eligibility criterion specified above).

Most employers would have already deducted TDS from your LTA balance and paid it to you as salary in FY 2020-21, or permitted you to carry the LTA balance forward to the next financial year for filing a claim. Also, it will not be qualified for this programme under the new tax framework.

Provided you purchased a cellphone, an air conditioner, or a refrigerator during the designated time, you may be eligible to claim your LTA as exempt if you meet all of the conditions given above, as all of these items are subject to a GST rate of 12% or more.