CBDT Increases Income Tax Exemption Limit On Leave Encashment To 25 Lakhs
As per a new notification released by the Central Board Of Direct Taxes (CBDT), the benefit of tax exemption on leave encashment has been increased for non-government employees.
The announcement made in line with the Budget 2023-24 will come into effect retrospectively from April 01, 2023.
Accordingly, the tax exemption on leave encashment upon retirement for salaried non-government employees has now been increased from Rs 3 lakh to Rs 25 lakh.
“In exercise of the powers conferred by sub-clause (ii) of clause (10AA) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to the maximum amount receivable by its employees as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement, whether superannuation or otherwise, hereby specifies the amount of Rs. 25,00,000 (twenty-five lakhs rupees only) as the limit in relation to employees mentioned in that sub-clause who retire, whether on superannuation or otherwise,” the notification read.
For the unversed, leave encashment means the amount that an employer pays its employees in exchange for unused leaves. An Employee can either use the leave balance during the course of their employment or after ten tendering his or her resignation. The same can be exercised upon retirement as a lumpsum amount.
