Salaried employees could soon get more value from their Leave Travel Concession (LTC) claims.
The Income Tax Department has proposed changes that may remove the current economy-class airfare cap and revise how travel to remote areas is reimbursed.
If approved, these changes could increase the tax-exempt amount employees can claim on official travel benefits.
Here’s what is being proposed.
Economy-Class Cap May Be Removed
At present, LTC tax exemption for air travel is limited to the cost of economy-class airfare — even if the employee is eligible to travel in a higher class.
This rule applies under the existing Income Tax Rules, 1962.
However, under Rule 278 of the Draft Income Tax Rules, 2026, the economy-class restriction has been removed.
If the draft is approved in its current form, employees will be able to claim exemption based on the class of travel they are officially entitled to.
That means those eligible for business class travel could also claim tax benefits accordingly.
This could be a significant relief for employees in higher pay grades.
New Rule for Travel to Remote Areas
The draft rules also address travel to places where public transport is not available.
Currently, in such cases, the exemption is linked to the fare of an air-conditioned first-class train ticket for the same distance.
The new proposal replaces this method with a fixed reimbursement limit of Rs 30 per kilometre for the shortest route.
This aims to simplify claims and make reimbursements more practical for employees travelling to remote or underserved locations.
What Is LTC and Why It Matters
Leave Travel Concession (LTC), also known as Leave Travel Allowance (LTA) in the private sector, allows employees to claim tax exemption on travel expenses for trips within India.
The benefit is subject to certain conditions and can help reduce taxable income.
With the proposed changes, employees may get more flexibility and potentially higher tax savings when claiming LTC.
When Will the New Rules Apply?
The Draft Income Tax Rules, 2026 are currently under public review and may be finalised after stakeholder feedback.
They are part of the new Income Tax Act, 2025, which is scheduled to take effect from April 1.
The changes will only apply after the government issues a final notification.
If implemented, these updates could make LTC claims more flexible and slightly increase the tax-efficient value of employer-provided travel benefits for salaried taxpayers.
