Rule 278 of the Draft Income-tax Rules, 2026 prescribes the conditions for exemption of Leave Travel Concession (LTC) or travel assistance under Schedule III (Table: Sl. No. 8). The exemption applies to travel concession or assistance received by an individual from an employer or former employer for travel within India either during leave or after retirement or termination of service. The exempt amount is limited to the actual expenditure incurred on travel, subject to prescribed ceilings. Where the journey is performed by air, the exemption cannot exceed the fare for the entitled class of travel by the shortest route. If the origin and destination are connected by rail and the journey is undertaken by a mode other than air, the exemption is limited to the air-conditioned first-class rail fare by the shortest route. Where the locations are not connected by rail, the exemption depends on whether a recognised public transport system exists. If such transport exists, the exemption cannot exceed the first-class or deluxe class fare by the shortest route. Where no recognised public transport system exists and no official transport rates are prescribed by the State transport authorities, the admissible amount is calculated at ₹30 per kilometre for the shortest route. The exemption is available for two journeys within a block of four calendar years beginning from 2022. If the benefit is not used in a block, one journey can be carried forward and claimed in the first calendar year of the next block without affecting the eligibility of two journeys in that block. The exemption is limited to two surviving children of the individual, though this restriction does not apply to children born before 1 October 1998 or in cases of multiple births after one child.
Extract of Rule No. 278 of Draft Income-tax Rules, 2026
Rule 278
Conditions for the purpose of Schedule III (Table: Sl. No. 8).
(1) The amount exempted under Schedule III (Table: Sl. No. 8) in respect of the value of travel concession or assistance received by or due to the individual from his employer or former employer for himself and his family, in connection with his proceeding,—
(a) on leave to any place in India;
(b) to any place in India after retirement from service or after the termination of his service,
shall be the amount actually incurred on the performance of such travel subject to the following conditions, namely:—
(i) where the journey is performed by air, the amount shall not exceed the fare admissible for the class of travel to which the employee is entitled, by the shortest route to the place of destination;
(ii) where places of origin of journey and destination are connected by rail and the journey is performed by any mode of transport other than by air, an amount not exceeding the air-conditioned first-class rail fare by the shortest route to the place of destination; and
(iii) where the places of origin of journey and destination or part thereof are not connected by rail and the journey is performed between such places, the amount eligible for exemption shall be :—
(A) where a recognised public transport system exists, an amount not exceeding the 1st class or deluxe class fare, as the case may be, on such transport by the shortest route to the place of destination; and
(B) where no recognised public transport system exists, and no specific rates have been prescribed either by the Directorate of Transport of the concerned State or of any neighbouring State, an amount calculated at the rate of Rs. 30 per kilometre for the distance of the journey by the shortest route shall be admissible.
(2) The exemption referred to in sub-rule (1) shall be available to an individual in respect of two journeys performed in a block of four calendar years commencing from the calendar year 2022.
(3) Where such travel concession or assistance is not availed of by the individual during any such block of four calendar years, an amount in respect of the value of the travel concession or assistance, if any, first availed of by the individual during first calendar year of the immediately succeeding block of four calendar years shall be eligible for exemption.
(4) The amount in respect of the value of the travel concession or assistance referred to in sub-rule (3) shall not be taken into account in determining the eligibility of the amount in respect of the value of the travel concession or assistance in relation to the number of journeys under sub-rule (2).
(5) The exemption referred to in sub-rule (1) shall not be available to more than two surviving children of an individual.
(6) The provisions of sub-rule (5) shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.
