May 25, 2023: The government today notified the Increased limit of Rs 25 lakh for tax exemption on leave encashment for non-government salaried employees. The entire leave encashment amount received is tax exempt for government employees. The increased deduction is available on credit of money for earned leaves at the time of retirement whether on superannuation or otherwise.
In her Budget Speech, finance minister Nirmala Sitharaman proposed to increase the limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to Rs 25 lakh with effect from April 1, 2023. This limit was earlier fixed at up to a limit of R 3 lakh only under Section 10(10AA)(ii) of the Income-tax Act,1961(the Act).
“The aggregate amount exempt from income tax under Section 10(10AA)(ii) of the Income Tax Act should not exceed the limit of Rs 25 lakh where any such payments are received by a non-government employee from more than one employer in the same previous year,” the finance ministry said in a notification issued today.
This benefit is subject to the conditions listed under Section 10 of the Income Tax Act.
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