Many important rules related to income tax have been made for the financial year 2025-26. The biggest change is that under the New Tax Reset, now those who earn up to Rs 12 lakh annually will not have to pay tax. The aim of the government is to make the tax system easier and to attract more and more taxpayers towards New Tax Regime. But an important question related to this is still in the minds of millions of employed people – if you get a tax exemption on Leave Travel Allowance – LTA on adoption of New Tax Regime?
In this article, we understand in detail who is given the tax exemption of LTA, which tax structure it applies and what is its entire process.
1. No exemption on LTA in New Tax Resetam
If you adopt a new tax regime, then understand that there will be no tax exemption on LTA. That is, if your salary includes LTA, then you have to pay tax on that entire amount – whether you have traveled or not, you have deposited the bill or not.
The government has introduced the New Tax Resetam as a simple and no discounted system. It does not provide tax exemption facilities like 80C, HRA, and LTA. If your company gives LTA and you have opted to cut TDS under New Tax Regime, then that amount will be added to your entire taxable income. That is, the benefit of LTA is possible only in the old tax system (Old Tax Regim).
2. Does LTA get tax exemption every year?
Many people have the illusion that LTA gets tax exemption every year, but it is not so. Tax exemption on LTA can be taken twice in a block of only four years. The current block starts from 1 January 2022 to 31 December 2025. During this period any employee can avail LTA exemption maximum twice.
If an employee has traveled only once during this block and claimed LTA only once, then he can transfer the discount of another journey to the first year of the next block. This is called carry forward facility.
3. How will private jobs get benefits?
If you work in private sector (private job) and want to take advantage of LTA exemption, then for this you have to choose the Old Tax Resetam. Under the old tax system, a tax exemption on LTA under section 10 (5) can be claimed.
Some of the conditions apply in this:
The journey should be within India, LTA discount on travel abroad.
For the journey, you will have to submit tickets for tickets, hotels, taxis etc.
The journey should be limited only to the employee and his family (such as wife, children, parents etc.).
The discount is applied only to travel expenses (fair), not hotels and food and drink.
4. Are the rules of government and private employees different?
The answer is – no. LTA rules are the same for both government and private sector employees. If the people of both categories choose the option of old tax regime, then they can take advantage of LTA tax exemption.
Suppose you have traveled to any part of India and the total expenditure in it came to 40 thousand rupees, but your company has given 30 thousand rupees as LTA in your salary – then you will get a tax rebate of up to 30 thousand rupees. That is, not with the cost you spend, but as much as LTA is included in your salary, you can get the same tax exemption.
