LTC Cash Voucher Scheme: Tax Exemption Rules Explained
Normally, claiming tax exemption on Leave Travel Concession (LTC) requires you to actually travel and submit travel bills. The LTC Cash Voucher Scheme, introduced as a pandemic-era relief measure, broke that link for one block period, letting employees claim the exemption by spending on goods and services instead. Here is how it worked and why it still matters for understanding LTC rules.
How LTC Exemption Normally Works
Leave Travel Concession (LTC), often called Leave Travel Allowance (LTA) in salary structures, allows a salaried employee to claim tax exemption under Section 10(5) for the cost of travel to any place in India, for themselves and their family, subject to certain conditions. The exemption is generally available for two journeys in a block of four calendar years, is limited to the actual travel cost (airfare, train fare or bus fare, depending on mode and entitlement), and critically, requires the employee to actually undertake the journey and submit proof of travel such as tickets or boarding passes.
The LTC Cash Voucher Scheme: What It Changed
During the financial year 2020-21, travel was severely restricted, leaving many employees unable to use their LTC entitlement for the 2018-21 block before it lapsed. The government introduced the LTC Cash Voucher Scheme to address this, allowing employees to claim the income tax exemption that would otherwise apply to LTC fare, without actually travelling, provided they spent a specified amount on the purchase of goods or services instead.
Conditions Under the Scheme
- The employee had to spend an amount equal to at least three times the deemed LTC fare on the purchase of goods or services that attract GST of 12% or more
- The expenditure had to be incurred during the specified period (originally 12 October 2020 to 31 March 2021)
- Payment had to be made through digital modes (not cash), and a tax invoice showing the GST amount paid had to be obtained
- The exemption was capped at a maximum of Rs 36,000 per person, or one-third of the specified expenditure, whichever was lower, for each eligible family member
Worked Example
Why This Scheme Still Matters Today
The LTC Cash Voucher Scheme was a one-time, time-bound measure tied to the 2018-21 block and the specific 2020-21 financial year. It is not a recurring or ongoing exemption available in later years. However, understanding it helps clarify two enduring points about LTC exemption generally: first, that the exemption is fundamentally linked to actual travel (or, in this one exceptional case, a substitute spending requirement legislated specifically for that purpose), and second, that any future government relief of a similar nature would need a fresh legislative or notification basis, since the cash voucher relaxation does not automatically apply to subsequent LTC blocks.
Claiming Regular LTC Exemption Going Forward
For the current and future LTC blocks, employees must follow the standard rules: actual travel within India, proof of travel (tickets, boarding passes, invoices from travel agents), and exemption limited to fare cost only (not hotel, food or local sightseeing expenses). Employees should submit LTC claims to their employer along with proof during the financial year, as this affects the TDS computed on salary under Section 192. If LTC exemption is not claimed through the employer during the year, it generally cannot be claimed directly in the ITR, since LTC is a component of salary structuring rather than a standalone deduction claimable independently.
Frequently Asked Questions
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- Primary category
- Income Tax
- Official starting point
- www.incometax.gov.in
- Editorial review date
- 2026-07-19
- Content status
- Finin2min explanation; official source controls where facts, law, rates, forms or procedures can change.
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