Travel is expensive. A family trip to Kerala - flights, hotels, local transport easily crosses ₹80,000. For most salaried employees, that’s nearly two months of discretionary income gone in one week. Which is why companies include Leave Travel Concession (LTC) in your salary. It’s the money specifically meant to fund domestic trips with no tax.
And yet, most people don’t use it or just don’t get around to claiming it.
If you skipped travelling in 2024 or 2025, you’re now carrying forward that unused LTC into 2026 and this is your last chance to use it.
So before you decide to put it off again, it’s worth knowing how to make the most of LTC and the new limits.
What’s new this time?
1. Business class exemption
Let’s start with the most visible update - Air Travel.
Until now, LTC had a clear limitation. Even if your company allowed you to fly business class, the tax exemption was capped at economy fares.
For example, if you’re flying Delhi to Bangalore. Your company policy allows business class, so you book business at ₹35,000. But when claiming LTC, you could only get exemption up to the economy fare of ₹8,000. The remaining ₹27,000 becomes taxable as salary.
Now, this aligns better. Under the new Income Tax Rules 2026, your LTC exemption is linked to the class of travel you’re officially entitled to. So if your employment contract clearly mentions business class (or premium economy), you can claim that fare instead of being restricted to economy.
But this only works if that entitlement is formally written down in your offer letter or company policy. A one-off approval or ‘manager said it’s okay’ won’t count here.
Who benefits from this?
Senior executives, VPs, C-suite employees — anyone whose contract includes business class as a standard benefit.
To see how much this saves you, let’s look at a VP flying from Mumbai to Hyderabad:
| Particulars | Before April, 2026 | After April, 2026 |
|---|---|---|
| Business class fare | ₹40,000 | ₹40,000 |
| Max exemption allowed | ₹12,000 | ₹40,000 |
| Taxable portion | ₹28,000 | ₹0 |
| Tax paid (at 30% bracket) | ₹8,400 | ₹0 |
That’s a tax saving of ₹8,400 on a single trip. And the rules change depending on how you travel.
2. Rail Travel
If your origin and destination are connected by a railway network, then rail fare becomes the benchmark for your LTC claim—even if you choose to fly or drive yourself.
Here, your exemption is capped at the AC First Class rail fare for the shortest route to your destination. And if you choose to fly or drive instead, that’s completely fine. You can still claim LTC, just up to what that AC First Class ticket would have cost.
This works well for most city-to-city travel. But what if your destination isn’t connected by rail at all?
3. Other modes of transport
This is where the rules used to get messy especially for remote or offbeat locations. Earlier, if there was no train route, you had to rely on ‘equivalent’ rail fares — estimating what an AC First Class ticket would have cost for that journey.
Now, the new income tax rules simplify this into two clear situations:
- If public transport exists (like buses or ferries): You can claim the actual First Class or Deluxe fare charged for that route.
- If there’s no recognised public transport at all: You don’t need to estimate anymore. You can calculate your claim at a fixed rate of ₹30 per kilometre, based on the shortest route.
For example, say you’re travelling to a remote destination where there’s no train or official bus service.
→Distance from nearest connected point: 300 km (one way)
→Return distance: 600 km
Your LTC calculation becomes 600 km × ₹30 = ₹18,000
That’s the amount you can claim only when there’s no recognised public transport or predefined fare available.
Now that you know how much you can claim, the next question is when do you need to use it?
When do you need to use your LTC?
The LTC operates in 4-year blocks. The current block is 2022–2025, divided into two sub-blocks:
- 2022–2023
- 2024–2025
If you didn’t travel in 2024 or 2025, you get a one-year carryforward window. That unused trip can be claimed anytime in 2026, but it must be completed by Dec 31, 2026.
After that, the exemption expires and the amount becomes taxable.
So if your LTC component is ₹40,000 or ₹50,000, that entire amount gets added to your income. And depending on your tax bracket, that’s easily a ₹10,000–₹15,000 impact — just because the trip didn’t happen.
Once you see it that way, it’s a direct loss.
What hasn’t changed?
Even with all the updates, the core LTC structure stays the same.
- LTC is strictly for domestic travel within India.
- You get two trips in a block of four years, with one unused trip allowed to carry forward.
- You can’t take both trips in the same year
- LTC only covers travel fare — flights, trains, buses. Not hotels, food, or local transport
- LTC works only under the old tax regime. If you’re in the new regime, there’s no exemption
And one more thing, you need to file Form 124 to claim your LTC with proper proof of tickets, boarding passes, and payment confirmation (UPI, card, net banking).
If anything is missing, your employer can reject the claim and tax the full amount.
Questions?