Non-central government employees would include employees of state governments, public sector enterprises, banks and private sector.
In an official statement, the government said: “In order to provide the benefits to other employees (i.e. non-central government employees) who are not covered by the above mentioned OM (the October 12 decision for central government employees) it has been decided to provide similar income-tax exemption for the payment of cash equivalent of LTC fare to the non-central government employees also.”
The fresh stimulus measure would allow non-government employees as well to claim tax free cash allowance from their employers if a LTC scheme similar to one in the government sector is included in their working contract.
However, the payment of cash allowance, subject to maximum of Rs 36,000 per person as deemed LTC fare per person (round trip) to non-central government employees, shall be allowed income-tax exemption subject to fulfilment of conditions, the CBDT statement said.
In order to avail the exemption, employees will be required too excercise the option in the block year of 2018-2021. Further, they would need a spend a sum equivalent to three times of the value of the deemed LTC fare on purchase of goods/ services which carry a GST rate of not less than 12 per cent.
The goods/services should be purchased only from GST registered vendors through digital mode. Employees should make this payment during October 12, 2020 to March 31, 2021.
In case an employee spends less than three times of the deemed LTC fare during the period, he or she shall not be entitled to receive the full amount of deemed LTC fare and the related tax exemption.
Further, the CBDT said that since this exemption is in lieu of the exemption provided for LTC fare, an employee who has exercised an option to pay income tax under concessional tax regime shall not be entitled for this exemption.
The government on October 12 announced giving out cash vouchers to central government employees this year in lieu LTC fare which could be spent only on buying non-food items with GST rate of 12 per cent or above.
(With agency inputs)