The Leave Travel Concession exemption lets a salaried employee reduce taxable income by the fare cost of domestic travel taken on sanctioned leave with eligible family members, under Section 10(5) of the Income Tax Act, 1961.1Indian Kanoon. Section 10(5) in The Income Tax Act, 1961 One condition decides whether any of this applies to you: the benefit exists only under the old tax regime. If you or your employer have not specifically opted out of the default new regime under Section 115BAC, an LTC component in your salary is fully taxable no matter how carefully you travel and file paperwork.
Confirm your regime choice with payroll at the start of the financial year. Switching after months of TDS have already been deducted creates avoidable complications, and employees often discover the mismatch only at filing time, after the trip.
Who Counts as Family
The exemption is for the individual employee, and it extends to travel by family members traveling with you. “Family” here means your spouse and children, and also your parents, brothers, or sisters if they are wholly or mainly dependent on you financially.1Indian Kanoon. Section 10(5) in The Income Tax Act, 1961 A sibling or parent earning their own income generally would not qualify. The dependency test is what matters for the extended family members, not the relationship alone.
For children born after October 1, 1998, you can claim for a maximum of two. There is a narrow exception for multiple births: if your first child is a single birth and the second pregnancy produces twins or triplets, all of them count as eligible even though the total goes past two.1Indian Kanoon. Section 10(5) in The Income Tax Act, 1961
What the Exemption Covers
Only domestic travel within India qualifies. International trips are excluded entirely, whatever label the employer puts on the allowance.1Indian Kanoon. Section 10(5) in The Income Tax Act, 1961 The exemption is limited strictly to the fare of getting to your destination by the shortest available route. Hotel bills, meals, local sightseeing, taxis at the destination, and entertainment are not covered.
How much fare you can claim depends on how you travel:
- By air, the exempt amount is capped at the economy class airfare by the shortest route to your destination.
- By rail, where the origin and destination are connected by rail, the exemption covers up to the AC first-class fare by the shortest route, even if you actually used a different mode.
- To a place not connected by rail but served by a recognized public transport service, you can claim up to the first-class or deluxe-class fare of that service for the shortest route.
- To a place not connected by rail and with no recognized public transport, the exemption defaults to the AC first-class rail fare for an equivalent distance, as if the trip had been made by train.
The statute also caps the exemption at what you actually spent.1Indian Kanoon. Section 10(5) in The Income Tax Act, 1961 If the formula allows a higher figure than the fare on your ticket, the ticket amount wins. Stopovers and longer routes do not increase the claim; the calculation follows the shortest direct path.
The Block Year System
LTC claims run on four-calendar-year blocks, not the April-to-March financial year. Within each block you can claim a maximum of two journeys. The 2022–2025 block has ended. The current block runs from 2026 through 2029, giving you two trip claims across that window.
If you did not use one of the two journeys in a block, you can carry it forward, but only if the trip is completed within the first calendar year of the next block. For the 2026–2029 block, that means any journey carried forward from 2022–2025 must be taken during calendar year 2026. Miss that year and the carried-forward journey is gone.
This is where employees most often lose money. People assume the carry-forward is usable at any point in the new block. Mark the calendar if you have an unused journey from the last block.
Documents to Keep
A claim stands or falls on paperwork. Collect and preserve:
- Original tickets: boarding passes for flights, printed or e-tickets for rail, bus tickets where applicable.
- Payment receipts showing the exact fare, payment date, and passenger names.
- A record of travel dates, origin and destination, and the shortest-route distance.
- Full names of every family member who traveled and their relationship to you.
Most employers issue a standardized LTC claim form through HR or finance. It usually asks for exact ticket numbers and fare amounts, and any mismatch between the form and your receipts can get the claim rejected. Keep copies of everything you hand in. Employers retain the originals for audit, and the tax department may raise a query years later.
How to Submit
Give the completed claim form and all supporting proofs to your employer’s finance or payroll team. Payroll checks that the trip meets Section 10(5): domestic route, shortest path, fare within the applicable ceiling, eligible family members, and the journey falling in the right block year. Once verified, the employer reduces your taxable salary by the exempt amount, and the adjustment flows into your Form 16, the annual TDS certificate summarizing your earnings and tax withheld.2TRACES. FAQs – Form 16 General Take-home pay rises because the tax that would have applied to the exempt fare is either not deducted or returned in a later payroll cycle.
Submit early. If you wait until the last weeks of the financial year, payroll may not process the exemption before annual TDS is finalized, and you will be left claiming the benefit only at the time of filing your income tax return.
Penalties for False Claims
Fabricated tickets or inflated fares are not a small compliance question. Under Section 270A of the Income Tax Act, misreporting of income can attract a penalty of up to 200 percent of the tax due on the misreported amount. A bogus claim worth a few thousand rupees in tax savings can produce a liability several times that once the penalty is added.
Tax authorities can cross-check claims against airline databases, railway booking records, and payment trails. Digital record-keeping has made detection more likely. An employer’s own audit can also catch a fake claim before it reaches the department, which brings workplace consequences on top of the tax exposure.
What Changes Going Forward
During the pandemic, the government allowed employees to claim an LTC-linked benefit by spending on goods and services carrying at least 12 percent GST from registered vendors, paid digitally, in place of actual travel.3Comptroller and Auditor General of India. LTC Special Cash Package That cash voucher scheme was extended through March 2025 and is not available in the 2026–2029 block. The new Income Tax Act, 2025, effective April 1, 2026, restricts the LTC exemption to actual travel fare. If you were counting on spending your way to the benefit, you now have to travel.