Leave encashment tax-free till ₹25 lakh for private sector employees upon retirement

PTI | | Posted by Nisha Anand

May 26, 2023 04:07 PM IST

The new increased limit for tax exemption on leave encashment on retirement will come in effect from April 1, 2023.

In line with the Budget announcement, the finance ministry on Thursday hiked the tax exemption limit for leave encashment upon retirement for private sector salaried employees to ₹25 lakh.

3 lakh.” title=”Earlier, the tax exemption on leave encashment for non-government employees was ₹3 lakh.”>

Earlier, the tax exemption on leave encashment for non-government employees was ₹3 lakh.

So far, the tax exemption on leave encashment for non-government employees was ₹3 lakh which was fixed in 2002, when the highest basic pay in the government was ₹30,000 per month.

The Central Board of Direct Taxes (CBDT), in a statement, said the aggregate amount exempt from income tax under section 10(10AA)(ii) shall not exceed the limit of ₹25 lakh, where any such payments are received by a non-government employee from more than one employer.

Also Read| Budget 2023: 5 major announcements on personal income tax

The increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to ₹25 lakh with effect from April 1, 2023.

“In pursuance to the proposal in the Budget speech, 2023,… the central government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to ₹25 lakh w.e.f. 01.04.2023,” the CBDT said.

In 2023-24 Budget, finance minister Nirmala Sitharaman had increased the tax exemption on leave encashment on retirement of non-government salaried employees to ₹25 lakh, from ₹3 lakh.

The new increased limit for tax exemption on leave encashment on retirement will come in effect from April 1, 2023.

Also Read| Budget 2023: 5 major announcements on personal income tax

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