Leave Travel Allowance (LTA) Exemption under Section 10(5)
Leave Travel Allowance (LTA), also called Leave Travel Concession (LTC), may be exempt from income tax when an employee or eligible family members travel within India and the conditions of Section 10(5) of the Income-tax Act, 1961 and Rule 2B of the Income-tax Rules, 1962 are satisfied.
What does Section 10(5) provide?
Section 10(5) provides an exemption for the value of travel concession or assistance received by an individual from a present or former employer for travel to any place in India by the individual and qualifying family members. The exemption is subject to conditions and limits prescribed under Rule 2B. It can also apply to qualifying assistance received after retirement or termination of employment.
The provision concerns travel within India. Foreign travel is not covered, even where part of a holiday involves a domestic journey.
Who can claim the exemption?
- Eligible taxpayer: An individual receiving qualifying LTA or LTC from an employer or former employer.
- Eligible family: Spouse and children; parents, brothers and sisters who are wholly or mainly dependent on the individual.
- Children restriction: In general, the exemption is limited to two surviving children born after 1 October 1998, subject to the statutory exceptions for multiple births and children born before that date.
- Travel requirement: The employee must actually undertake the journey for a claim relating to the employee's travel; family travel is governed by the applicable statutory conditions.
How much LTA is exempt under Rule 2B?
The exempt amount is the lowest of the eligible actual travel fare, the relevant Rule 2B ceiling and the LTA/LTC amount received from the employer. The prescribed ceilings depend on the mode of transport and route.
| Journey | Maximum eligible fare under Rule 2B |
|---|---|
| Air travel | Economy-class airfare of the national carrier by the shortest route to the destination. |
| Rail-connected destination, where travel is not by air | Air-conditioned first-class rail fare by the shortest route. |
| Places not connected by rail; recognized public transport available | First-class or deluxe-class fare, where available, by the shortest route. |
| Places not connected by rail; no recognized public transport | Air-conditioned first-class rail fare for the distance of the journey, as if performed by rail. |
The applicable fare ceiling is determined under the text of Rule 2B and the facts of the journey. The actual fare paid and employer reimbursement remain relevant limits.
Four-year LTA blocks: 2026 to 2029
Ordinarily, exemption is available for two journeys in a block of four calendar years. The current block is 1 January 2026 to 31 December 2029; the preceding block was 2022 to 2025. These are calendar-year blocks, not financial-year or assessment-year blocks.
Carry-forward of one unused journey
If the employee does not use the full two-journey entitlement in a block, one qualifying journey may generally be carried forward and claimed in the first calendar year of the next block, subject to Rule 2B. A carried-forward journey does not count against the normal two journeys available in the new block. Unused journeys cannot be accumulated indefinitely.
Old versus new tax regime
Old tax regime: An eligible employee may claim the Section 10(5) exemption when the statutory conditions are satisfied.
New tax regime: Section 10(5) exemption is not available when income is computed under the concessional regime of Section 115BAC. The regime chosen for the relevant tax year therefore matters.
Practical example
An employee receives Rs. 60,000 as LTA and spends Rs. 38,000 on eligible domestic travel tickets. If the Rule 2B fare ceiling for that journey is Rs. 32,000, the exempt amount is Rs. 32,000. The remaining Rs. 28,000 of the allowance is taxable, assuming the employee is eligible to claim LTA under the applicable tax regime.
Documents and compliance
- Retain tickets, booking confirmations, boarding passes and payment records showing the journey and actual cost.
- Maintain the itinerary and details of eligible family members, including dependency evidence where relevant.
- Submit travel evidence and declarations requested by the employer for payroll tax calculations.
- Check the four-year block, any carry-forward entitlement and the tax regime used for the year.
Frequently asked questions
Can hotel, food and sightseeing costs be claimed?
No. Section 10(5) with Rule 2B concerns eligible travel fare, not accommodation, food, local sightseeing or other vacation expenses.
Is LTA exempt without taking a journey?
No. Merely receiving an LTA component in salary does not establish exemption. Qualifying travel and the prescribed conditions are required.
Can LTA be claimed for travel outside India?
No. The exemption applies to travel to a place in India, subject to the prescribed conditions.
Is there a fixed rupee exemption for everyone?
No. The amount depends on the actual eligible fare, Rule 2B limits and the employer's LTA/LTC payment.
Official legal references
Consult the Income-tax Act, 1961, including Section 10(5) and Section 115BAC, and the Income-tax Rules, 1962, including Rule 2B, on the Income Tax Department's official website. The Income Tax e-Filing portal provides current return-filing guidance. Check the legislation and instructions applicable to the relevant tax year, particularly in light of the transition to the Income-tax Act, 2025.
Updated: 10 October 2026. This article provides general tax information; eligibility depends on the law applicable to the relevant tax year and the facts of each claim.