With a view to compensate  Central Government employees and incentivise consumption, thereby giving a boost to consumption expenditure, the Government of India allowed payment of cash allowance equivalent  to  LTC fare to Central Government employees subject to fulfilment of certain conditions vide OM No F. No 12(2)/2020-EII (A) dated 12th October 2020. It has also been provided that since the cash allowance of LTC fare is in lieu of deemed actual travel, the same shall be eligible for income-tax exemption on the lines of existing income-tax exemption available for LTC fare.

In order to provide the benefits to other employees (i.e. non-Central Government employees) who are not covered by the above mentioned OM, 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. Accordingly, 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 specified in para 4.

The income-tax exemption to receipt of deemed LTC fare by a non-Central Government employee (‘the employee’) shall be allowed subject to fulfilment of the following conditions:-

(a)       The employee exercises an option for the deemed LTC fare in lieu of the applicable LTC in the Block year 2018-21.

(b)       The employee spends a sum equals 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% from GST registered vendors / service providers (‘the specified expenditure’) through digital mode during the period from the 12th of October, 2020 to 31st of March, 2021 (‘specified period’) and obtains a voucher indicating the GST number and the amount of GST paid.

(c)        An employee who spends less than three times of the deemed LTC fare on specified expenditure during the specified period shall not be entitled to receive full amount of deemed LTC fare and the related income-tax exemption and the amount of both shall be reduced proportionately as explained in Example-A below.

The DDOs shall allow income-tax exemption subject to fulfilment of the above conditions after obtaining copies of invoices of specified expenditure incurred during the specified period. Further, as 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 under section 115BAC of the Income-tax Act, 1961 shall not be entitled for this exemption.

The clarifications issued by the Department of Expenditure, Ministry of Finance for the Central Government employees vide OM F. No 12(2)/2020-EII (A) Dated 20th October, 2020 and subsequent clarification, if any, issued in this regard shall apply mutatis mutandis to non-Central Government employees also subject to fulfilment of conditions specified in the preceding paras.

The legislative amendment to the provisions of the Income-tax Act, 1961 for this purpose shall be proposed in due course.

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The central government on Monday announced a ₹73,000 crore demand push to the economy but no consensus to break the deadlock between the central government and those of states and UTs over mode of payment of GST compensation, Union Finance Minister Nirmala Sitharaman after another GST Council meeting.

By the end of Monday’s meeting 12 states had accepted the centre’s payment proposal – to borrow from the markets on their own account – but nine others stood their ground and insisted the centre do the borrowing.

Overall 21 states – mostly those ruled by the BJP or those that have supported it on various issues – have agreed to borrow. Ms Sitharaman has asked for time to consider the demands of the nine states who refused to do so after today’s meeting.

Earlier in the day finance minister announces govt employees LTC CASH scheme and other measures push for economy .

“Measures by the government to stimulate demand must not burden the common citizen with future inflation and must not put government debt on an unsustainable path. Today’s solution should not cause tomorrow’s problem,” finance minister Nirmala Sitharaman said, explaining the government’s philosophy behind Monday’s measures.

RBI on Friday announced a slew of steps to reduce borrowing costs to revive the economy without cutting policy rates, and also for the first time admitting that the economy will contract 9.5% in this fiscal year with a mild expansion in economic activity in the March quarter.

The government’s announcements to boost consumer demand such as leave travel concession (LTC) cash voucher scheme ( ₹5,675 crore) and special festival advance scheme ( ₹4,000 crore) are mostly frontloading expenditure with balancing offsetting changes later that will directly benefit over 11 million central government employees.

The central government employees who have not availed of LTC in the past four years, including FY21, can utilize the scheme if they agree to digitally spend three times the airfare or rail fare and the full amount of total leave encashment before 31 March on purchases attracting minimum 12% good and services tax (GST).

Under the special festival advance scheme, an interest-free loan of `10,000 to all central government employees will be offered as a one-time facility to be recovered in a maximum of 10 instalments.

The Centre is also encouraging state governments and private organizations to give similar facilities to their employees.

Sitharaman suggested that the government has targeted this well-off category of central government employees to boost demand as they have escaped the adverse economic effects of the pandemic with their salaries more or less protected and savings increased.

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