Big changes could be coming for salaried employees who claim Leave Travel Concession (LTC).
The Income Tax Department has proposed easing current LTC rules under the Draft Income Tax Rules, 2026.
If approved, employees may be able to claim higher tax-exempt travel benefits — especially those eligible for higher travel classes.
Here’s what that means in simple terms.
Economy-Class Cap May Be Removed
At present, LTC tax exemption for air travel is capped at the cost of an economy-class ticket.
This means even if an employee travels in business class, the tax benefit is limited to the economy fare.
Under the proposed Rule 278 of the Draft Income Tax Rules, 2026, this restriction could be removed.
Instead of limiting exemption to economy class, the benefit may apply to the travel class the employee is officially entitled to.
So, if someone is eligible for business class under company rules, they may be able to claim tax exemption accordingly.
This change would replace the older Rule 2B of the Income Tax Rules, 1962.
In short, eligible employees could claim tax benefits based on their actual travel entitlement — not just economy fare.
New Rule for Travel to Remote Areas
The draft also proposes a change for employees travelling to places where public transport is not available.
Currently, in such cases, the maximum exemption is linked to the fare of an air-conditioned first-class train ticket for the same distance.
The new proposal suggests a simpler approach.
Instead of linking it to train fares, a fixed reimbursement limit of Rs 30 per kilometre (by the shortest route) may apply.
This could make it easier for employees travelling to remote or underserved areas to calculate and claim their LTC benefits.
What Happens Next?
The Draft Income Tax Rules, 2026 are currently under public review.
They are part of the upcoming Income Tax Act, 2025, which is scheduled to take effect from April 1.
However, the new LTC rules will apply only after final approval and notification by the government.
Stakeholders can submit feedback before the rules are finalised.
If implemented in their current form, these changes could give salaried employees more flexibility and potentially increase the tax-efficient value of employer-provided travel benefits.
For frequent travellers and those entitled to higher-class travel, this could be a meaningful update.
