Festive ‘stimulus’ for workers: Must you go for it

Vijay C Roy

Tribune News Service

Chandigarh, October 13

On Monday, Finance Minister Nirmala Sitharaman unveiled a slew of incentives for Central government employees to spend more in an attempt to boost economy. The measures included LTC cash voucher scheme, leave encashment and festival advance. The Tribune analyses what the scheme holds out for employees and whether they should opt for it or not.

LTC cash voucher

An employee opting for this scheme will be required to buy goods or services worth three times the fare. The scheme also requires that money must be spent on goods attracting GST of 12% or more from a GST-registered vendor through digital mode. The employee is required to produce GST invoice to avail the benefit.

According to an office memorandum, if an employee has a pay of Rs 1,38,500 and family of four eligible for economy class air travel, the calculations are as follows:

Leave encashment = (1,38,500×1.7) x10/30 = Rs54,015

Fare value (as entitled): Rs20,000 x4 = Rs80,000

So the amount to be spent by the employee for full cash benefit will be Rs 2,94,015. This includes leave encashment and fare (3×80,000) without going on a vacation, provided he spends this amount to purchase non-food items which attract over 12% GST.

Experts are of the view it will be better for employees to pay tax on the amount availed by them rather than making purchases until and unless necessary.

Leave encashment

The Central government employees are eligible to get 10 days of leave encashment (basic plus DA). Under the scheme, an equivalent gross amount has to be spent that is received from leave encashment. However, it will be subjected to tax depending on the slab under which the employee falls. If the employee comes under 30% tax slab and his leave encashment is Rs 50,000, net amount received by him will be Rs 35,000 (Rs 50,000-15,000).

Festival advance

The Finance Minister also announced an interest-free advance of Rs 10,000. However, this will come as a pre-paid Rupay card, which would limit customer choices.

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