LTA in New Tax Regime
Leave Travel Allowance (LTA) is a tax benefit available to salaried employees, allowing them to claim exemptions on travel expenses incurred during leave. This exemption is applicable only for domestic travel and is subject to specific conditions set by the Income Tax Act. While LTA has been a popular tax-saving tool under the old tax regime, it is not available under the new tax regime introduced by the government. Understanding the rules, eligibility criteria, and the process of claiming LTA is essential for employees to maximize their tax benefits.
Let’s explore the specifics of Leave Travel Allowance (LTA), covering its eligibility criteria, exemption rules, and the impact of the new tax regime on claiming benefits through this article.
Table of Contents:
Budget 2025 Update: No Income Tax on Earnings Up to ₹12.75 Lakh
The government has increased the Section 87A rebate limit from ₹7 lakh to ₹12 lakh, providing significant tax relief to the middle class. Additionally, salaried individuals can benefit from a ₹75,000 standard deduction, effectively making incomes up to ₹12.75 lakh tax-free under the new tax regime.
Revised Tax Slabs (New Tax Regime)
Income Range (₹) | Tax Rate |
0 – 4 lakh | No Tax |
4 lakh – 8 lakh | 5% |
8 lakh – 12 lakh | 10% |
12 lakh – 16 lakh | 15% |
16 lakh – 20 lakh | 20% |
20 lakh – 24 lakh | 25% |
24 lakh & above | 30% |
What is Leave Travel Allowance (LTA)?
Leave Travel Allowance (LTA), also known as Leave Travel Concession (LTC), is a tax-free allowance given by employers to salaried employees to cover travel expenses during vacations. It allows employees to reduce their taxable income by claiming exemptions on eligible travel costs.
LTA can also be claimed for travel after retirement or termination of service if provided by the former employer. It is an important tax-saving tool and is widely used by employers when structuring a tax-efficient salary package (CTC).
However, under the new tax regime, LTA is NOT available as a deduction. Employees who choose the new regime cannot claim this tax-saving benefit.
LTA Block Year System
LTA exemption is allowed for up to two journeys taken within a block of four calendar years. A block year is a fixed period of four years during which an employee can claim LTA for up to two trips. The current block period started in 2022 and will end in 2025. Here are the details:
Current Block: 2022-2025
Previous Block: 2018-2021
If an employee does not claim LTA during the current block, they can carry forward one unclaimed LTA to the next block, but they must use it in the first calendar year of the new block (2026). If they fail to do so, the unclaimed LTA will lapse, and they will need to wait for the next block to claim LTA again.
To make the most of LTA benefits, employees should plan their travel within the designated block period to avoid missing out on exemptions.
Who Can Claim LTA in New Tax Regime?
LTA can be claimed under the old tax regime if:
You are a salaried employee who receives LTA as part of your salary package.
Your employer has included LTA as a separate component in your salary structure.
You have actually traveled within India during your leave period. International trips are not eligible.
Your travel includes eligible family members, such as your spouse, children, dependent parents, or dependent siblings.
Eligibility for LTA Exemption
To claim an exemption for LTA, employees must meet specific conditions set by the Income Tax Act:
The travel should be undertaken within India, as international travel expenses are not covered under LTA.
The travel should be for the employee and immediate family members only. This includes the spouse, children, and dependent parents or siblings.
The exemption is available only for the travel cost and does not cover expenses like accommodation, meals, sightseeing, or other incidental costs.
Employees can claim an exemption for two children. However, an exception is made for children born before October 1, 1998.
LTA can be claimed twice in a block of four years. The current block is from 2022-2025.
If an employee does not claim LTA during the block period, they can carry forward one unclaimed LTA to the first year of the next block.
Leave Travel Allowance Exemption Rules for Various Modes of Transport
The mode of transport used by the employee determines the amount of exemption available under LTA. The exemption is calculated based on the shortest route to the destination and back. The rules for different modes of transport are as follows:
Mode of Travel & Exemption Rules for LTA in New Tax Regime
Employees who choose the new tax regime cannot claim this tax-saving benefit of LTA. The mode of travel and exemption rules for claiming LTA is as below:
Air Travel: If the journey is by air, the exemption is limited to the economy class fare of Air India for the shortest route to the destination.
Rail Travel: If the journey is undertaken by train, the exemption is restricted to the AC first-class fare for the shortest route.
Other Transport: If the destination is not connected by air or rail, the exemption is calculated based on the deluxe or luxury bus fare for the shortest route available.
The amount that can be claimed is always the lower of the actual travel cost incurred or the maximum fare allowed under these rules.
LTA Exemption u/s 10(5)
│
┌───────────────┴───────────────┐
Travel by Air Travel by Any Other Mode
│
Exempt: Lower of ┌────┴─────┐
Actual Expense or Railway Available Railway Not Available
Economy Class Fare │ │
┌──────────────┴──────────────┐
Public Transport Exists No Public Transport
│ │
Exempt: Lower of Exempt: Lower of
Actual Expense or Actual Expense or First-Class Rail Fare
Deluxe/First-Class Fare for the same distance
How to Claim LTA?
To successfully claim LTA, follow these steps:
Plan your travel within India and ensure that it is undertaken while on leave.
Retain all travel-related documents, including tickets, boarding passes, and invoices for proof of journey.
Submit the necessary documents to your employer before the end of the financial year.
Your employer will verify and process the claim based on the eligible exemption limits.
Receive the LTA tax exemption under the old tax regime when filing your income tax return.
It is important to note that employers may have their own additional procedures or timelines for LTA claims. Employees should check with their HR or finance department for specific guidelines.
Claiming LTA in Case of Job Change
If an employee changes jobs during a block year, the unclaimed LTA amount can be claimed from the new employer, provided it has not been claimed with the previous employer. However, if the employee has already availed of LTA with the previous employer, they cannot claim it again under the new employer.
Employees must keep a record of LTA claims to ensure they do not exceed the permitted limit of two claims per block.
Claiming LTA for Multi-Destination Travel
If an employee visits multiple destinations during a single trip, the exemption is calculated based on the fare for the farthest point reached in the journey and back. For example:
If an employee travels from Delhi → Mumbai → Chennai → Kolkata → Back to Delhi, the exemption is calculated based on the fare for the Delhi to Chennai route and return.
Expenses incurred on intermediate destinations within the trip are not considered separately under LTA.
What Expenses Can Be Included Under LTA?
Eligible Expenses
Cost of travel by air, rail, or bus for the shortest route.
Travel costs for the employee, spouse, children, and dependent parents or siblings.
Non-Eligible Expenses
Hotel accommodation expenses.
Meals and local transportation within the travel destination.
Expenses for sightseeing, shopping, or any other recreational activities.
Travel undertaken via private vehicles unless operated by a recognized transport service.
FAQs
1. How much can I claim tax exemption in Leave Travel Allowance (LTA)?
The exemption amount is limited to the actual travel cost incurred or the maximum eligible fare for the shortest route, whichever is lower. This means if your travel expenses are lower than the standard fare set by the government, only the actual amount spent will be exempted. If your expenses are higher, the exemption is capped at the government-approved fare.
2. What is the latest block period to claim LTA exemption?
The current block period is from 2022-2025. Employees must complete their eligible travel within this period to claim LTA benefits. If they miss claiming it within this timeframe, they can carry forward one pending claim to the first year of the next block (2026), but after that, the benefit expires.
3. How many trips can I make in one year to claim the exemption?
Employees can claim LTA exemption for two journeys in a block of four calendar years. However, these two claims cannot be made in the same calendar year, meaning there should be a gap of at least one year between the two claims.
4. Can I claim LTA benefit for the travel costs of my family?
Yes, LTA can be claimed for the travel costs of immediate family members, including your spouse, children, and dependent parents or siblings. However, it does not cover extended family members such as cousins, uncles, or aunts.
5. Can I claim LTA if I pay taxes under the new tax regime?
No, LTA is not available as a deduction under the new tax regime. If you opt for the new tax regime, you will not be able to claim LTA exemptions, as the regime offers lower tax rates in exchange for giving up exemptions and deductions.
6. Can I claim LTA for travel by private car?
No, travel via private vehicles is not eligible unless operated by a recognized transport service. LTA exemptions are only available for travel by air, rail, or public transport such as buses operated by government or recognized transport services.
7. What if my journey includes multiple destinations?
The exemption is calculated based on the fare for the farthest point reached and return. Any additional stops or layovers within the trip will not be separately considered for LTA exemption purposes.
8. Can I claim LTA if I travel alone?
Yes, LTA can be claimed even if the employee travels alone. It is not mandatory to travel with family members to claim the exemption.
9. Do I need to submit proof of travel to claim LTA?
Yes, documents such as tickets, boarding passes, and travel invoices must be submitted as proof of travel. Employers require these documents to process the LTA claim, and failure to submit them may result in rejection of the claim.
10. What happens if I do not claim LTA in the given block?
If you do not claim LTA within the given block period, you can carry forward one unclaimed LTA to the first year of the next block (2026). However, if it is not used in the first year, it will lapse, and you will have to wait for the next block period to avail of LTA benefits again.
11. Can I claim LTA for international travel?
No, LTA is applicable only for domestic travel within India. Any international trips taken, even for work or family vacations, are not eligible for LTA exemption.
12. Does LTA cover hotel and food expenses?
No, LTA only covers travel expenses and does not include accommodation or food costs. Expenses related to hotel stays, meals, sightseeing, and other leisure activities are not eligible under LTA exemption.
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