Rule 2B: Leave Travel Allowance Exemption Under Section 10(5)
Rule 2B prescribes the conditions and travel-fare limits for claiming exemption for leave travel concession (LTC) or leave travel allowance (LTA) received from an employer or former employer under Section 10(5) of the Income-tax Act, 1961.
Who can claim LTA or LTC exemption?
An individual employee may claim exemption for eligible travel concession or assistance received from the present or former employer for travel by the employee and eligible family members:
- While proceeding on leave to any place within India.
- While travelling to any place in India after retirement or termination of service, where the relevant conditions are met.
For this purpose, family generally includes the spouse and children, and parents, brothers and sisters who are wholly or mainly dependent on the employee. The restriction relating to more than two surviving children born after 1 October 1998 is subject to statutory exceptions for children born before that date and multiple births following one child.
Travel fare exemption limits under Rule 2B(1)
The exemption is limited to the actual eligible travel expenditure and the prescribed fare ceiling. The exemption cannot exceed the travel concession or assistance received.
| Mode or route | Maximum eligible fare |
|---|---|
| Journey by air | Economy-class airfare of the national carrier by the shortest route to the destination. |
| Origin and destination connected by rail; journey by a mode other than air | Air-conditioned first-class rail fare by the shortest route. |
| Places not connected by rail, where a recognised public transport system exists | First-class or deluxe-class fare, as applicable, on that transport by the shortest route. |
| Places not connected by rail, where no recognised public transport system exists | Equivalent air-conditioned first-class rail fare for the shortest-route distance, as though travelled by rail. |
The reference to the national carrier is the wording of Rule 2B; for a claim, verify the applicable fare benchmark and employer documentation requirements. Actual expenditure below the prescribed ceiling remains the effective limit.
What expenses are excluded?
Section 10(5) and Rule 2B focus on the cost of eligible travel. Hotel accommodation, meals, sightseeing, local tourism expenses and other incidental holiday costs do not qualify merely because they were incurred during the trip. International travel is not covered.
How many journeys are exempt?
Under Rule 2B(2), exemption is available for two journeys in each block of four calendar years. The relevant blocks include 2022-2025 and 2026-2029. A block is based on calendar years, not financial years.
Carry-forward of one unused journey
Where an eligible journey has not been claimed in a four-year block, the carry-forward concession permits one unavailed journey to be claimed in the first calendar year of the next block, subject to the conditions in Rule 2B(3). Such a qualifying carry-forward journey is not counted as one of the two journeys of the new block. For example, an unused journey from 2022-2025 may be availed of in 2026.
Example of LTA exemption calculation
Assume an employee receives Rs. 45,000 as LTA, incurs Rs. 38,000 on eligible domestic travel fares and the applicable Rule 2B fare ceiling is Rs. 32,000. Subject to all other conditions, the exemption is the lowest of these amounts: Rs. 32,000. The remaining Rs. 13,000 of LTA is taxable.
Documents and practical conditions
- Keep tickets, boarding passes, invoices and other proof of the journey and actual fares.
- Retain details of the journey, destinations, dates and family members travelling.
- Confirm the employer's LTA policy and payroll declaration requirements.
- Maintain a record of journeys claimed in the current four-year block and any valid carry-forward.
- Check tax-regime eligibility before claiming the exemption in the return.
Rule 2B provisions explained
Sub-rule (1): Eligible travel and fare limits
Travel concession or assistance received or due from the employer or former employer may be exempt for travel on leave or after retirement or termination, restricted to actual travel costs and the fare limits specified for air, rail-connected and non-rail-connected journeys.
Sub-rule (2): Four-year block
The exemption applies to two journeys in a block of four calendar years, with historical transitional provisions relating to journeys before 1 April 1989.
Sub-rule (3): Unused journey
A qualifying unused journey may be carried into the first calendar year of the immediately following block. The carried-forward journey is disregarded when counting the two journeys otherwise available in the succeeding block.
Sub-rule (4): Children
The exemption is ordinarily restricted to not more than two surviving children in respect of children born after 1 October 1998, with exceptions for children born before that date and specified multiple-birth situations.
Frequently asked questions
Can LTA exemption be claimed without travelling?
No. Exemption depends on an eligible journey and actual qualifying travel expenditure.
Is LTA exemption available in the new tax regime?
No, the Section 10(5) exemption is generally not available under the concessional new tax regime. Check the law applicable to the tax year of the claim.
Can hotel expenses be included?
No. The exemption is for eligible travel fares, not accommodation or other holiday spending.
Does a trip outside India qualify?
No. Rule 2B concerns journeys to places in India.
Note: This article explains the legacy Rule 2B framework and commonly applicable exemption conditions. The correct claim depends on the assessment or tax year, tax regime and applicable amendments.