Union Finance Department has made a key announcement on leave encashment for private employees. As announced in the budget, the tax exemption limit on leave encashment of private employees after retirement has been increased to Rs 25 lakh. So far the tax exemption on leave encashment for non-government employees was Rs.3 lakh. This limit was fixed in 2002.
In a statement, the Central Board of Direct Taxes (CBDT) said that the amount exempted from income tax under Section 10(10AA)(ii) cannot exceed Rs.25 lakh. The extended tax exemption limit on leave encashment will come into effect from 1st April 2023.
According to the proposal in the 2023 budget, the central government has increased the tax exemption limit on leave encashment received by private employees after retirement to Rs.25 lakh, effective from April 1, 2023, CBDT said.
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