Leave Travel Allowance (LTA)

What it is

Leave Travel Allowance (LTA), sometimes called Leave Travel Concession (LTC), is a salary component that allows an employee to claim a tax exemption on the cost of travel incurred during leave taken to travel anywhere within India, alone or with family. It's governed by Section 10(5) of the Income Tax Act, read with the associated rules.

How the exemption works

The exemption only covers actual travel fare — economy air fare, AC first-class rail fare, or the equivalent, depending on mode and distance — for the employee and specified family members; it does not cover local conveyance, hotel stays, food, or sightseeing at the destination. The exemption is generally available for two journeys in a block of four calendar years (a "block" defined by the government, not tied to the employee's joining date), and an unused claim from one block can, under specific rules, carry over into the first year of the next block.

An important limitation

LTA exemption is only available under the old tax regime — an employee who opts for the new tax regime cannot claim this exemption, even if their salary structure includes an LTA component (in that case, the LTA amount is simply taxed as regular income). This is one of the clearest practical differences between the two regimes that HR and payroll teams need to explain during structuring and regime-selection conversations.

Why it matters for payroll

Employees need to submit actual travel proof — tickets, boarding passes, invoices — to claim the exemption; unclaimed or undocumented LTA is simply added back to taxable salary at year-end, which is a common source of employee surprise if the documentation process isn't communicated clearly upfront.