Central Board of Direct Taxes (CBDT) has raised the tax exemption on leave encashment on retirement of non-government salaried employees from ₹3 lakh to ₹25 lakh, the tax authority said in a statement on Thursday (25th May 2023).
The relief, which was announced in the union budget speech this year (2023), is effective from 1 April 2023.
The direct tax authority said that the relief applies to the period of earned leave in the credit of the employee at the time of retirement whether on superannuation or otherwise.
The total tax-exempt amount under a section in the Income Tax Act dealing with leave encashment of salaried private sector employees shall not exceed the limit of Rs. 25 lakh, said the tax authority.
In the case of government employees, the entire leave encashment amount received is tax exempt. In the case of private sector employees, the benefit is subject the conditions listed under section 10 of the Income Tax Act, which deals with incomes exempt from taxation.
The earlier limit of ₹3 lakh for tax exemption on leave encashment on retirement or resignation of private sector employees was fixed in year 2002, when the highest basic pay in the government was ₹30,000 per month.
Finance minister Nirmala Sitharaman had said in her budget speech that the limit for tax exemption for leave encashment for non-government salaried employees was being raised to ₹25 lakh in line with the increase in government salaries.
The revision in the tax exemption limit for leave encashment will offer a lot of relief to non-government employees, said Om Rajpurohit, Joint Partner (corporate and international tax) at accounting firm AMRG & Associates...
Source : Mint