New vs Old Tax Regime: Will You Pay Full Tax on Travel? LTA Rules Explained

By Siddhi Jain | May 26, 2025, 20:52 IST

The new tax regime introduced by the Indian government has been praised for offering zero tax on income up to ₹12 lakh for eligible taxpayers. But as salaried employees explore this seemingly tax-friendly option, one key question arises: What happens to Leave Travel Allowance (LTA)? Can you still claim tax exemption on travel under the new system?

Let’s break down the key differences between the new and old tax regimes when it comes to LTA — and whether your travel reimbursements will be tax-exempt or fully taxable.

What Is Leave Travel Allowance (LTA)?

LTA is a component of your salary that covers the cost of travel for you and your family while on leave. Under certain conditions, LTA can be claimed as a tax deduction, making it a valuable benefit for salaried professionals.

However, this benefit is only available under the old tax regime. So if you're eyeing the new regime for its lower rates and simplified structure, you may need to reconsider your tax-saving strategies.

LTA in the New Tax Regime: Is It Tax-Free?

Unfortunately, no. According to the Income Tax rules applicable for the financial year 2025–26, LTA is not eligible for exemption under the new tax regime. Even if your salary includes an LTA component and you submit valid travel bills, the entire amount will be taxable.

This is because the new tax system forgoes exemptions and deductions like LTA, HRA, and standard deductions in exchange for lower tax rates. So, while your overall income may be taxed at a lower rate, you miss out on claiming travel-related tax savings.

LTA in the Old Tax Regime: What Are the Rules?

If you stick with the old tax regime, you can still enjoy LTA benefits — but only under specific conditions:

LTA must be part of your salary package.
You must provide valid travel documents and bills to your employer within the financial year.
The travel should be domestic only — international travel is not covered.
LTA can be claimed for expenses incurred by the employee, spouse, children, and dependent parents or siblings.
Only the actual travel fare (via air, rail, or bus) is considered for exemption. Hotel bookings, meals, and sightseeing are not covered.

LTA Exemption: 4-Year Block Rule

One of the most important rules around LTA is the four-year block concept. As per current guidelines:

Employees can claim LTA exemption twice in a four-year block.
The ongoing block is January 1, 2022, to December 31, 2025.
If you miss claiming LTA during the block, you can carry forward one journey to the first year of the next block.

So, if you haven't claimed LTA yet, you still have time to plan a domestic trip and submit bills before December 2025.

Which Tax Regime Should You Choose?

Choosing between the old and new tax regimes depends on your income structure and deductions. If your salary includes components like LTA, HRA, and you also claim investments under 80C or medical insurance under 80D, the old regime may offer more savings.

On the other hand, if you don’t have many deductions and prefer simplicity, the new regime with its zero-tax slab up to ₹12 lakh might work better.

Conclusion

While the new tax regime is attractive due to simplified rates and lower tax liability, it comes at the cost of popular exemptions like Leave Travel Allowance. If travel reimbursements are a big part of your tax planning, it may be worth sticking with the old regime — at least until the end of the current LTA block in 2025.

Always evaluate your tax strategy annually and consult a professional if needed. After all, a smart choice today can lead to substantial tax savings tomorrow.