The Leave Travel Concession (LTC) benefit for salaried employees will continue in its present form under the Income Tax Act, 2025, which comes into force from April 1, 2026.
The Draft Income-tax Rules, 2026, clarify that there is no structural change in how the LTC exemption will work. The provisions have been moved to Schedule III of the new law, with detailed conditions laid out under Rule 278. However, the eligibility rules remain largely the same as those under the Income Tax Act, 1961.
Employees will continue to be eligible for exemption for two journeys within a block of four calendar years. The ongoing block of 2022–2025 remains valid.
If one journey is not used during a block, it can be carried forward to the first calendar year of the next block. This claim will not reduce the two-journey entitlement available in the new block.
The exemption will apply only to travel fare. Costs such as hotel stay, food, local travel and tourism activities will not be covered.
The draft rules also restate the fare limits. For air travel, the exemption will be limited to the fare for the entitled class on the shortest route. For destinations connected by rail, the AC First Class rail fare will apply, except when travel is by air.
For locations not connected by rail, first-class or deluxe fare of recognised public transport will be considered. In cases where no recognised public transport is available, a cap of Rs. 30 per kilometre on the shortest route will apply. This Rs. 30 per km limit has now been clearly codified.
The restriction to two surviving children continues. Exceptions remain for children born before October 1, 1998, and for multiple births after the first child.
LTC exemption will remain available only under the old tax regime.