LTC rule changes expected from April 1: Air and rail fare caps set under Draft Income-tax Rules

1. Evidence required for LTC claim

As per Rule 205 of the Draft Income-tax Rules, 2026, “The assessee shall furnish to the person responsible for making payment under section 392(1), the evidence or the particulars of the claims referred to in sub-rule (2), in Form No. 124 for the purpose of estimating his income or for computing the tax required to be deducted at source.”

2. Conditions for exemption

As per Rule 278 of the Draft Income-tax Rules, 2026, the amount exempted in respect of travel concession or assistance received by or due to an individual from his employer or former employer for himself and his family, “on leave to any place in India; 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.”

3. If 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.”

4. If the origin and destination are connected by rail

“An amount not exceeding the air-conditioned first-class rail fare by the shortest route to the place of destination.”

5. If places are not connected by rail, 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.”

6. Where no recognised public transport system exists

“An amount calculated at the rate of ₹30 per kilometre for the distance of the journey by the shortest route shall be admissible.”

7. Block of four years

As per the Draft Income-tax Rules, 2026, “The exemption 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.”

8. Two-child condition

The exemption shall not be available to more than two surviving children of an individual. “This shall not apply in respect of children born before 1st October, 1998, and also in case of multiple births after one child.”