10 Days Leave Encashment in The LTC Cash Package is Taxable or Not- CLARIFICATION -2

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10 Days Leave Encashment in The LTC Cash Package is Taxable or Not

Government announced the Special LTC CASH PACKAGE SCHEME for Central Government Employees on dated 12/10/2020. In this Scheme Government Employee can purchase the Goods/Services levied GST 12% or More upto 31/03/2021 as per the announced Rates. The Employees can also encash 10 days EL along with this Package to purchase Goods/Services.  

Employees are confused whether the 10 days Leave Encashment amount is Taxable or not as Some HoS going to deduct the TDS from Leave Encashment.

 

Normally a Government Employee When Encash 10 days EL during the LTC is taxable.

But this is a Special Package given by the Central Government to boost the Market and the 10 days Leave Encash is not taxable as per the the circular dated 12/10/2020 stating at point (g)  " While TDS is applicable in the case of Leave Encashment, since the cash reimbursement of LTC fare is in lieu of deemed actual travel, the same shall be allowed exemption on the lines of existing income tax exemption available to LTC fare. The legislative amendment to the provision of the Income-Tax Act, 1961 for this purpose shall be proposed in the due course. Hence, TDS shall not be required to be deducted on the reimbursement of deemed LTC fare."

Hence The Income Tax / TDS is not applicable on the EL encashed along with LTC CASH PACKAGE only to those employee who opted Old Tax Regime. The Employees who opted the New Tax Regime is not eligible for this Exemption.

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