The Central Board of Direct Taxes, CBDT in its notification issued stated and has increased the income tax exemption limit on leave encashment for non-government salaried employees.
The Central Board of Direct Taxes, CBDT released the notification by the Board in accordance with the 2023-2024 Budge. Therefore, the income tax exemption limit on leave encashment upon retirement for salaried non-government workers was raised by Finance Minister Nirmala Sitharaman from an amount of Rs 3 lakh to Rs 25 lakh.
The Notification read that 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 with regards 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, thus, weather the superannuation or otherwise, specified 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, which being weather on superannuation or otherwise.
However, the sum that an employer pays its employees in exchange for unused leaves which is being known as leave encashment and the Employee in the case have two options for using their accumulated leave balance i.e., it is either during their employment or as a complete and final settlement upon retirement or resignation.