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
Sunita uses the LTC Cash Voucher SchemeSunita's deemed LTC fare entitlement for herself and her family for the 2018-21 block was Rs 90,000 (covering herself, her spouse and two children). To claim the full exemption, she needed to spend at least 3 x Rs 90,000 = Rs 2,70,000 on goods or services attracting 12% GST or more, via digital payment, during the specified window. She purchased a laptop, furniture and electronic appliances totalling Rs 2,80,000 through her credit card, with invoices showing the GST charged. Since her spending exceeded the required Rs 2,70,000, she could claim the full Rs 90,000 as tax-exempt, treated as if it were LTC fare for that block, without having travelled at all.
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
Is the LTC Cash Voucher Scheme available for the current LTC block? ▼
No. The LTC Cash Voucher Scheme was a one-time relaxation announced for the financial year 2020-21, tied specifically to the 2018-21 LTC block, in response to pandemic-related travel restrictions. For subsequent LTC blocks, the standard rules requiring actual travel and submission of travel proof apply, unless the government announces a fresh similar scheme through a specific notification.
Can I claim LTC exemption if I travel abroad? ▼
No. Leave Travel Concession exemption under Section 10(5) is available only for travel within India. International travel costs, even if reimbursed by the employer as part of an LTC-like benefit, are not eligible for this tax exemption and would be treated as a fully taxable perquisite or allowance.
What documents should I keep for claiming LTC exemption in a normal year? ▼
Keep original or digital copies of travel tickets, boarding passes, and the travel agent's invoice clearly showing the fare component separately from any package costs like hotel stays. Submit these to your employer's payroll or HR team within the timeline they specify during the financial year, since the exemption is applied at the TDS computation stage and is difficult to claim retroactively in the ITR without employer documentation.