ITR Filing 2026: Are you aware of these rules regarding Leave Travel Allowance?

Leave Travel Allowance Income Tax Rules: The deadline for filing Income Tax Returns (ITR)—July 31—is fast approaching. Consequently, many salaried taxpayers are likely reviewing the tax deductions and exemptions reflected in their Form 16. One significant tax benefit among these is the Leave Travel Allowance (LTA), which allows employees to claim tax relief on travel expenses incurred during their leave.

However, it is important to note that strict conditions apply to claiming a tax exemption on LTA under the Income Tax Act. Many people mistakenly believe they can save tax on their entire vacation expenditure, but that is not the case. Let us understand the rules, eligibility criteria, and the calculation of the exemption associated with LTA.

1. What is Leave Travel Allowance (LTA)?

Leave Travel Allowance (LTA)—also referred to as Leave Travel Concession (LTC) in some contexts—is an allowance provided by employers to cover travel expenses incurred by employees during their leave.

Under Section 10(5) of the Income Tax Act and Rule 2B of the Income Tax Rules, a tax exemption can be claimed on this allowance if the employee fulfills all the conditions prescribed by the government.

The benefit of tax exemption on LTA is available only to taxpayers who opt for the old tax regime. If you have chosen the new tax regime, you will not be entitled to any tax exemption on LTA.

2. Who can claim LTA?

Certain basic eligibility criteria must be met to claim a tax exemption on LTA. This exemption is available only to salaried employees whose salary package or CTC structure explicitly includes an LTA component. If this component is not part of your salary, you cannot claim it. Furthermore, the tax exemption is valid only if the employee is actually on leave and has undertaken travel during that period.

3. Which expenses qualify for tax exemption and which do not?