LTC Cash Voucher Scheme Explained: 2025 Status Update

The LTC Cash Voucher Scheme: A Ground-Level Look at What It Was, What It Meant, and Where Things Stand Now

Let’s rewind to late 2020. The country was deep in the throes of the COVID-19 pandemic, travel was off the cards for most, and the government was looking for ways to boost spending and offer relief to employees stuck at home. Enter the LTC Cash Voucher Scheme—a policy move that got people talking, shopping, and, yes, saving on taxes.

The Basics: What Was the LTC Cash Voucher Scheme?

In October 2020, the government rolled out the LTC Cash Voucher Scheme for Central Government employees through Office Memorandum No. F. No 12(2)/2020-EII (A), dated October 12, 2020. Not long after, the benefit was extended to non-central government employees—including those in the private sector—via a CBDT press release on October 29, 2020.

The idea was pretty straightforward: since employees couldn’t travel to claim their usual Leave Travel Concession (LTC) tax break, why not let them spend that money on goods and services instead? The twist—this wasn’t just a free-for-all shopping spree. There were clear conditions:

• You had to spend three times the deemed LTC fare on goods or services that attracted at least 12% GST.
• No cash payments—only digital transactions counted.
• Purchases had to be made from GST-registered vendors, and proper GST invoices were a must.
• The scheme was capped at a maximum benefit of Rs 36,000 per person for non-central government employees.

If you spent less than the required amount, your tax exemption was reduced proportionally. The math was simple and transparent, and official government clarifications backed this up.

Who Could Actually Use It?

Eligibility was broad but not universal:

• Central government, PSU, state government, and private sector employees could all participate—provided their employer offered LTC or LTA as part of their salary package.
• The scheme was only for those under the old tax regime. Anyone who switched to the new concessional tax regime under Section 115BAC was out of luck—a crucial detail that many missed at the time.
• The scheme covered eligible family members as per existing LTC rules: spouse, children, and dependent parents. Invoices could even be in a family member’s name, which added flexibility for households.

How Did It Work in Practice?

Here’s how it played out:

• Employees had to make qualifying purchases between October 12, 2020, and March 31, 2021. That was the hard cutoff for spending.
• The government later extended the deadline for submitting bills and invoices to May 31, 2021 (for Central Government employees), but the purchases themselves still had to be made by March 31.
• All payments had to be digital—UPI, credit/debit cards, cheques, etc. No cash allowed.
• Employees submitted invoices (even those in family members’ names) to their employer, who then processed the claim and reimbursed the eligible amount tax-free—provided all conditions were met.

Employers had to verify every invoice, check that GST numbers and rates were correct, and ensure that no TDS was deducted if the rules were followed. This added a layer of admin work, especially for larger organizations.

The Fine Print: Legislative and Administrative Updates

While the scheme was announced in October 2020, it was formally written into law by CBDT Notification No. 50/2021 on May 5, 2021. This inserted sub-rules (1A) and (1B) in Rule 2B of the Income Tax Rules, 1962, giving the scheme its legal backbone—a step that many articles overlooked.

There were also some important clarifications:

• The scheme was strictly for the 2018-21 LTC block and only for the 2020-21 financial year. No purchases after March 31, 2021, counted, even though you could submit bills till May 31.
• Using the Cash Voucher Scheme counted as one LTC trip for the block, so it affected future LTC entitlements.
• The scheme did not apply to those who had already exhausted their LTC for the block or who had opted for the new tax regime.

What Did People Actually Buy?

The scheme covered any goods or services with a GST rate of 12% or higher. That meant big-ticket items like electronics, appliances, and even furniture were popular choices. Multiple bills were allowed, and purchases could be split across family members.

What About the Private Sector?

For private sector employees, the scheme was a bit of a mixed bag. While the rules were clear, implementation depended on whether the employer offered LTA/LTC in the salary structure. There was some confusion about how to process claims, but the government clarified that no extra compliance burden was added—just the usual documentation and record-keeping.

The End of the Road: Expiry and Current Status

Here’s the most important update: The LTC Cash Voucher Scheme is no longer active. It was a one-time measure for the 2020-21 financial year, and all purchases had to be made by March 31, 2021. Despite calls from industry bodies and tax experts to extend the scheme due to ongoing pandemic restrictions, the government did not renew it in subsequent budgets.