Leave travel allowances are grant provided by the employer in connection with the journey of employees and his family on leave to any place in India or in connection with proceeding to any place in India after retirement from service or termination of his service. Leave travel allowances received shall be exempt from tax u/s 10(5) of the income tax act. The exemption is available subject to the following condition:

• Where the journey is performed by air the exemption is limited to the air economy fare of the national carrier by shortest route to the place of destination.
• Where the journey is performed by rail or any mode other than air transport, the exemption is limited to the air conditioned first class fare by shortest route to the destination.
• Where there is no recognised public transport system exists, the amount equivalent to the air-conditioned first class rail fare for the distance of journey by shortest route shall be eligible for exemption.
• The concession shall not exceed the actual amount of expenditure incurred on the performance of such journey.
• The exemption can be claimed in respect of two such journeys in a block of four calendar years.
• If no concession is availed for a block of four years, the allowance with respect to one journey can be carried forward in the next block and claimed the exemption in the first year of the said block.
• If leave travel concession is not utilised and encashed, the same will be added to the salary income and taxed as such.
• Family means spouse, children, parents, brother, and sister wholly or mainly dependent upon him. However, the exemption is not available to more than two children of individual after 1.10.1998.
• The current block is from calendar year January 2010 to December 2013.

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