Client wants an LTA bill for a package: what you can issue

Say a client books a six-day Kerala package through you this December: flights, hotels, a houseboat night, transfers and your fee, folded into one price. A week later they ask for an LTA bill for the package, something that shows the whole amount as airfare so their company accepts the claim.

It's a fair question asked badly. LTA has never paid for hotels, houseboats or sightseeing, only the fare of the journey. Refuse flatly and you look unhelpful; agree and you've put your agency's name on a false invoice. There's a third option: show exactly what's exempt, on paper that holds up with HR and the tax department.

What LTA actually exempts, and what it never does

LTA exempts only the cost of a domestic journey, taken on leave, for the employee and specified family, capped at the lowest of the LTA paid, the fare actually spent, and a fare limit set by rule. Nothing else in a package qualifies.

As of October 2026, a lot of advice still cites section 10(5) of the 1961 Act. From 1 April 2026 the Income-tax Act, 2025 moved it to Schedule III, Table Sl. No. 8 (read with section 11), with conditions now in Rule 278 of the Income-tax Rules, 2026 (ICAI's tabular mapping); use the old citation only for FY 2025-26 and earlier. For the full section map, keep the renumbering table handy.

Covered	Not covered
Air, rail or road fare for the journey, shortest route	Hotels, houseboats, resort stays
Fare for the employee and eligible family travelling	Meals, sightseeing, local cabs at destination
Up to two journeys in the current four-year block	Insurance, visa fees, your agency's service fee

The fare caps, old rule and new

The column follows the tax year the LTA falls into as salary, not the date on the booking. Where a trip and its reimbursement straddle 1 April 2026, let the CA pick the column.

Mode	FY 2025-26 (old Rule 2B)	2026-27 onward (Rule 278)
Air	Economy fare, national carrier	Fare of entitled class, shortest route
Rail-connected, other mode	AC first-class rail fare	Same
No rail, public transport exists	1st/deluxe class fare	Same
No rail, no public transport	Notional AC first-class rail fare	₹30 per km, if no State transport rate is prescribed

Source: Rule 278, Income-tax Rules 2026, against old Rule 2B as reproduced in State Bank of India v. ACIT. The exempt amount is the lowest of the LTA paid, the fare spent, and this cap, never the package price. A no-rail-link cab leg and a circuit's "shortest route" stay unsettled: flag both to the CA.

Who can actually claim it

Five questions decide whether there's anything to claim.

1. Regime. The new, default regime excludes this exemption under section 202. A salaried client with no business income can switch each year in the return filed by the due date (e-filing guidance, AY 2026-27); no old regime, no exemption.
2. On leave. The journey has to be made on leave.
3. Who's travelling. "Family" means spouse and children, plus parents, brothers and sisters only if wholly or mainly dependent; friends, in-laws and other relatives are outside it. The exemption covers at most two surviving children, except children born before 1 October 1998 and multiple births after one child.
4. Which journey, which block. Two journeys per four-calendar-year block; current block 2026-2029. If the client claimed nothing in 2022-25, a journey in calendar 2026 can be the carried-over one without using up a 2026-29 journey, so travel must happen by 31 December 2026. Partial use in 2022-25 is a CA question.
5. Domestic only. One foreign leg kills the whole claim, not just that leg; the Supreme Court (4 November 2022) held the exemption covers travel within India only, with no carve-out for the domestic portion (SBI v. ACIT), and held the employer liable for not deducting TDS. On 30 July 2026 ITAT Rajkot was still deciding a bank's TDS demands over foreign-leg claims for assessment years 2016-17 and 2017-18; the bank won only because a High Court interim order had stopped it deducting tax at the time (ITAT Rajkot). An outbound package with TCS never helps an LTA claim.

What the employer will actually ask for

The law only asks the employer to obtain evidence of the claim (section 392(5)(b)), and Rule 205 asks for "evidence of expenditure" for LTA; the document list is the employer's own policy. The form is now No. 124 under Rule 205 (old Form 12BB/Rule 26C for FY 2025-26) (Income-tax Rules 2026). HR typically asks for tickets or boarding passes, your invoice and proof of payment, and is strict because an ineligible claim leaves the employer facing the TDS demand, not the agent. Whether taxes and convenience fees count inside "amount actually incurred" varies; show the ticket total as printed, let HR decide.

The check, when run, is simple: match the claim to the airline's record. A 2024 Delhi High Court case on government LTC shows it: an audit found claims of ₹1,48,044 and ₹1,11,603 were really ₹76,772 and ₹69,813 once checked against the airline, and the employees had to refund the full LTC amounts with 10% penal interest (Ram Krishna Datta v. Union of India). The enquiry found they "merely received the tickets as given to them by the travel agent", which points the trail at whoever issued the tickets.

What you can issue for a package

Four honest things, none needing the word "LTA" on your invoice: the invoice as it stands, a fare annexure, a booking letter, and the airline's e-tickets underneath it all.

A. Fare annexure, attached to the invoice

ANNEXURE A TO INVOICE NO. [...] DATED [...]
Fare component in the package price

Traveller: [Name] | Sector: [DEL-COK-DEL] | Date: [DD/MM/YYYY]
Airline/flight: [...] | PNR: [...] | Ticket no.: [...]
Fare as ticketed: ₹[...]
(repeat per traveller, per sector)

Total fare as ticketed: ₹[...]
Land services (hotels, transfers, sightseeing, fee, GST): ₹[...]
Package price (matches invoice total): ₹[...]

Fares are as printed on the attached e-tickets. Hotels, meals,
sightseeing and our service charge are not fares.

One block per traveller per sector, so HR can match each PNR. Take each fare from the airline's e-ticket, which is the fare-side document for GST anyway, never from the package price. Totals must reconcile to the invoice.

B. Booking confirmation letter, the honest "travel certificate"

[Letterhead]               Ref: [...]     Date: [DD/MM/YYYY]

Confirms travel booked for [Employee] and family against
Invoice No. [...] dated [...].

Traveller(s), relationship, sector(s), dates, airline, flight no.,
PNR, ticket no.: [...]

Fare as ticketed: ₹[...]. Balance of ₹[...] is for hotels,
transfers, sightseeing and our services, not a fare.

Payment received: ₹[...] on [date], [mode], ref [...].

[Signatory, designation, phone]

Certify only booking and payment, never that the journey happened, unless you operated the transport or hold the boarding passes. No rule prescribes an "LTA certificate" format; this plus the e-tickets is the kind of "evidence of expenditure" Rule 205 refers to, and the employer decides what it accepts. The client still needs the employer's LTA form and Form No. 124 (Form 12BB for FY 2025-26), filled in by the employee, by the employer's deadline, usually January-March.

C. The refusal script, for "sab flight dikha do"

"We can't show the hotel and sightseeing as flight fare. LTA only
exempts the fare, and HR can match the PNR against the airline's
record, so a changed bill risks your claim and both of us. What
we'll give you: the invoice, a fare annexure showing ₹[...] as
ticketed, the e-tickets, and a signed booking letter."

If pushed: "Even writing the whole package as flight, your LTA of
₹[...] still caps the claim, so you'd gain only ₹[...]."

Careful: Don't put the employer's GSTIN on an LTA booking because the client asks "for company records." ITC on "travel benefits extended to employees on vacation such as leave or home travel concession" is blocked under CGST section 17(5)(b)(iii), unless a law obliges the employer to provide it. Book it on the employee's own details.

Worked example: the ₹1.2 lakh Kerala package

Example: Say a client books Delhi-Kochi-Delhi in December 2026 for themselves, spouse and two children aged 9 and 12, on leave. The ₹1,20,000 package invoice splits into e-tickets for all four, economy, direct routing, totalling ₹52,400 (illustrative, not a market quote), and ₹67,600 for hotels, the houseboat night, cabs, sightseeing, the fee and GST. The employee's LTA for the year is ₹60,000, old regime, and the employer's policy entitles economy.

The exempt amount is the lowest of ₹60,000 (LTA received), ₹52,400 (fare incurred) and the Rule 278 cap, which here doesn't sit below the fare paid. So ₹52,400 is exempt, ₹7,600 stays taxable, exactly as if the client had booked the flights themselves.

Had the whole ₹1,20,000 been billed as "air fare," the claim still can't exceed the ₹60,000 LTA received: the false bill buys at most another ₹7,600 of exemption, for an invoice that doesn't match the airline's own record.

Two edge cases: a third child born after 1 October 1998 (not a multiple birth) loses one fare; a client still in the new regime gets zero exemption regardless of paperwork.

Why you can't just write it all as flight

Re-describing a land package as airfare is an incorrect invoice: CGST section 122(1)(i) sets the penalty at ₹10,000 or the tax evaded, whichever is higher (CBIC, section 122). Section 483 (old 277A) punishes a false entry made to help evade tax with simple imprisonment up to two years plus a fine, evasion or not; section 484 (old 278) covers abetting a false declaration like an employee's Form 124, usually just a fine here, since jail terms need over ₹10 lakh evaded (ICAI compilation). The client's own misreporting penalty is 200% of the tax on the under-reported income under section 439 (old 270A), against 50% for plain under-reporting.

We found no reported case of a travel agent prosecuted over an LTA bill. It's the same risk as faking hotel bookings or dummy tickets for a visa file: fine until checked against the primary source. The arithmetic above is the stronger argument: the false bill barely moves the exemption.

One last distinction: this is private-sector LTA. Leave Travel Concession, the government scheme with its own authorised agents and DDO paperwork, is a different animal; that rulebook sits on its own.

Common questions

Can I claim LTA on a tour package?

Only the fare component, if it's a domestic journey during leave, within the current block, and the client is in the old regime. Hotel, houseboat and sightseeing inside the package are never part of the claim.

LTA me hotel claim hota hai kya?

Nahi. LTA sirf journey ke fare ko cover karta hai, Rule 278 wale cap tak. Hotel, khana, sightseeing ya service fee, inme se koi claim nahi hota, package mein chahe jitna shamil ho.

Is LTA allowed in the new tax regime?

No. The new, default regime excludes this exemption under section 202. A salaried client can switch to the old regime each year in the return filed by the due date; otherwise the LTA is fully taxable, whatever paperwork you attach.

The short version

• LTA exempts only the fare of a domestic journey on leave, never hotels, houseboats, meals or sightseeing.
• For 2026-27 onward, cite Schedule III Sl. No. 8 and Rule 278, not the old section 10(5) and Rule 2B.
• The exempt amount is the lowest of the LTA paid, the fare spent and the Rule 278 cap, never the package price, and only in the old regime.
• A foreign trip, even one domestic leg of it, doesn't qualify at all.
• Issue the invoice as it is, a fare annexure tied to the e-tickets, and a booking letter certifying only what you booked and were paid.
• Refuse "sab flight dikha do" with the arithmetic: the false bill barely raises the exemption and risks a penalty on your own invoice.
• Rules are mid-transition this year; confirm the citation and your client's case with their CA before they file.