Leave Travel Allowance (LTA)

This entry describes the position under the Income-tax Act, 1961. That Act was repealed with effect from 1 April 2026, and it is worth being precise about what that does and does not change, because the two statutes overlap.

Section 536(2) of the Income-tax Act, 2025 continues the repealed Act for any tax year beginning before 1 April 2026. The Finance Act, 2026 then charges income-tax for the assessment year commencing 1 April 2026 under the Income-tax Act, 1961, at the rates in Part I-A of its First Schedule. So for income of the financial year 2025-26 and earlier, the rules set out below are the governing rules, not history.

What is unresolved is the position from tax year 2026-27 onward. The successor provision has not been located in the Income-tax Act, 2025 or the Income-tax Rules, 2026, and this entry does not guess at one. Anyone structuring pay for 2026-27 should establish the current position from the 2025 Act directly rather than carrying the figures below forward.

Leave travel allowance, also called leave travel concession, is an amount an employer pays towards an employee's travel while on leave. Section 10(5) exempts the value of that travel from tax, and Rule 2B sets the limits.

The exemption is conditional in a way that catches people out every year. It attaches to a journey that actually happened, not to the allowance. An employee who receives leave travel allowance every month and never travels is taxed on all of it. There is no proportionate relief for intending to travel, and no relief for travel by someone else in the family while the employee stayed at home, since the employee has to be part of the journey.

Its cousin, house rent allowance, is claimed almost every year by almost everyone who rents. Leave travel allowance is claimed twice in four years by the people who remember it exists, which is why it generates a disproportionate share of confused questions in January.

Only the fare is exempt. This is the single most useful thing to tell employees before they book.

Everything outside the fare is taxable: hotel stays, meals, taxis at the destination, entry tickets, and the tour operator's margin on a package. Where an employee books a package, payroll should ask for the fare component separately, because the package total cannot be allowed.

Two further limits. The journey must be within India, so a trip that includes a foreign leg does not qualify even if part of it was domestic. And the ceiling is the shortest route by the prescribed class, so an employee who flies business class or takes a scenic route is exempt only up to what the direct economy fare would have been.

The limit is two journeys in a block of four calendar years. The blocks are fixed by the government and run consecutively, so they are the same for every employee and every employer, and they do not move when someone changes jobs. Confirm the current block before advising anyone, since it turns over every four years.

Two features of the block matter in practice.

• The blocks run on calendar years, not financial years. A journey in February belongs to the block containing that calendar year, while the exemption is claimed in the financial year in which the travel took place. Employees who think in April-to-March terms often mis-slot a January or February trip.
• An unclaimed journey carries forward, but only one, and only into the first calendar year of the next block. Take that carried journey in that first year and it does not count against the two available in the new block, so three journeys can be exempt across those four years. Miss the first year and the carry-forward lapses.

A worked case. An employee receives 60,000 in leave travel allowance for the year and travels with their family, with economy air fares by the shortest route totalling 45,000. The exemption is 45,000 and the remaining 15,000 is taxable salary. Had the same employee spent 90,000 on business class fares, the exemption would still stop at the economy figure. Had they not travelled at all, the whole 60,000 would be taxable.

The exemption covers the employee and their family travelling with the employee. Family here means the spouse and children, and parents, brothers and sisters who are wholly or mainly dependent on the employee.

There is a restriction on children that trips people up. The exemption is available for a limited number of children born after a specified date, with an exception where a single birth produced more than one child. Children born before that date are outside the restriction. Confirm the number and the cut-off date before applying it, since this is a rule employees rarely know and rarely accept without a citation.

The condition that the family travels with the employee is real. Fares for a spouse and children who travelled separately while the employee stayed back are not exempt, whoever paid for them.

The claim is declared in Form 12BB and supported by evidence of the journey. There is no prescribed list of documents, so most employers ask for the following, and it is worth publishing that list at the start of the year rather than in January.

• Tickets or boarding passes for each traveller, showing the fare separately from taxes and package elements.
• The dates of travel, with proof that the employee was on leave for them.
• Names of the family members who travelled, with their relationship to the employee.
• For a package booking, a fare break-up from the operator.

The employer's duty to obtain evidence under Section 192(2D) applies here as it does to any other claim, so allowing a leave travel claim on a bare declaration exposes the employer to short deduction. Where the evidence does not arrive by the proof deadline, the claim is reversed and the tax recovered from the remaining months, which is the same mechanism that produces the January spike on every other unproven claim.

The exemption is not available under the default regime with lower slab rates. An employee who travelled, kept every ticket and never recorded a regime choice gets nothing from any of it.

The failures are specific to this exemption rather than generic proof failures.

• The whole holiday is claimed. Employees submit a package invoice covering flights, hotel and transfers and expect the total to be exempt.
• The block is counted from the joining date or the financial year rather than from the fixed calendar-year block, so a second journey is claimed when both have already been used.
• A journey with a foreign leg is claimed for its domestic portion, which does not work.
• The employee travelled but took no leave, or has no record of having taken it.
• The carried-forward journey is claimed in the second or third year of the new block rather than the first, by which point it has lapsed.
• The employee changed employers mid-block and both employers allowed a journey, since neither could see the other's records. The limit follows the employee, not the employment.

The last one has no payroll fix. It is worth asking a mid-year joiner directly how many journeys they have already claimed in the current block, alongside the Form 12B collection at onboarding.

Leave travel concession is exempt under Schedule III, Table Serial Number 8 of the Income-tax Act, 2025, the successor to section 10(5). The Schedule covers a sum received from the employer for the employee and family in connection with proceeding on leave to any place in India, and a sum from the employer or former employer in connection with proceeding to any place in India after retirement or after termination of service. Two limits sit in the Schedule itself: the conditions are as prescribed, including as to the number of journeys and the amount exempt per head, and those conditions must have regard to the concession granted to Central Government employees; and the exempt sum shall in no case exceed the expenses actually incurred for the travel.

Rule 278 of the Income-tax Rules, 2026 carries the conditions. The exemption is available for two journeys performed in a block of four calendar years, the blocks running from calendar year 2022. Where the concession is not availed in a block, the value of the concession first availed in the first calendar year of the immediately following block is eligible, and that carried journey is not counted against the two-journey limit for the new block. Where no recognised public transport system exists and no rates have been prescribed by the Directorate of Transport of the state or a neighbouring state, an amount at thirty rupees per kilometre for the shortest route is admissible.

The exemption is not available for more than two surviving children. That restriction does not apply to children born before 1 October 1998, nor to multiple births after one child.

The practical consequences are unchanged in shape. The concession covers travel and not the whole holiday, it is capped at what was actually spent, and it is a domestic-travel concession. An employer paying an LTA component monthly without any journey being taken is paying a taxable allowance, whatever the payslip calls it.