Leave Travel Concession (LTC) is one of the most popular tax benefits available to salaried employees. With the new Income Tax Act, 2025 set to come into force from April 1, 2026, many employees are wondering whether LTC rules will change.
The draft Income-tax Rules, 2026 have now clarified how LTC exemption will operate under the new framework — and the good news is that the core structure remains largely the same.
What LTC means under existing law (Income Tax Act, 1961)
Under Section 10(5) of the Income Tax Act, 1961, salaried employees can claim tax exemption on Leave Travel Concession (LTC/LTA) for domestic travel within India.
Here are the current key rules:
-Two journeys in a block of four years (current block: 2022–2025)
-Exemption available only for travel fare, not hotel, food or sightseeing
-Eligible family includes spouse, children, and dependent parents/siblings
-Exemption is restricted to actual travel cost, or LTA provided by employer — whichever is lower.
Mode limits:
Air: Economy fare of national carrier (shortest route)
Rail: AC First Class fare
Public transport: First class/deluxe class fare
One unutilised journey can be carried forward to the first year of the next block and exemption is restricted to two children born after October 1, 1998 (with exceptions for twins and children born before this date).
LTC exemption is available only under the old tax regime provided valid tickets and travel proof are submitted. COVID-era optional cash voucher scheme was separately introduced.
What the Draft Income-tax Rules, 2026 say
The new Income-tax Act, 2025, which will apply from April 1, 2026, shifts LTC provisions to Schedule III (Table: Sl. No. 8) and detailed conditions are now prescribed under Rule 278 of the Draft Income-tax Rules, 2026.
Two journeys in four-year block continues
The draft rules clearly state that exemption will be available for 2 journeys in a block of four calendar years. The block commencing from calendar year 2022, which means the current block structure continues.
Mode-wise exemption limits are clarified and the exemption remains limited to actual travel cost, subject to ceilings.
Air travel: Fare admissible for the entitled class by shortest route
Rail-connected places (travel not by air): AC First Class rail fare by shortest route
Places not connected by rail:
If recognised public transport exists: First class or deluxe fare
If no recognised public transport: Rs 30 per kilometre by shortest route
The Rs 30 per km cap is now explicitly codified in the draft rules.
Carry forward rule retained
If an employee does not utilise LTC in a block, one unavailed journey can be claimed in the first calendar year of the next block. That carry-forward claim will not reduce the two-journey limit of the new block.
Two-child restriction continues
The draft rules retain the restriction that exemption is not available for more than two surviving children and does not apply to children born before October 1, 1998. It also does not apply in case of multiple births after one child.
Only travel fare remains eligible
Just like the existing rules, exemption applies only to Air/rail/bus fare and expenses on hotel stay, food, local transport, tourism activities are not covered under LTC exemption.
What has actually changed?
For salaried employees, there is no major structural change in LTC rules under the new Income Tax Act, 2025.
The draft rules largely mirror the existing provisions under Section 10(5), but they reorganise them under the new law and provide clearer codification of limits such as the ₹30 per kilometre rule.
The biggest practical point remains unchanged – LTC exemption continues to be available only under the old tax regime.
Summing up…
From April 1, 2026, LTC will continue much the same way it works today. Employees can still claim exemption on travel fare for two trips in a four-year block, subject to prescribed limits and documentation. The new Income Tax Act, 2025 does not take away this benefit — it simply shifts it into the new legislative structure.