New Delhi : There is good news for the workers working in the private sector. That is, at the time of retirement of employees working in the private sector, no tax will have to be paid on the cash amount received in lieu of leave up to Rs 25 lakh. The Central Government has increased the limit of tax exemption on cash received in lieu of leave at the time of retirement to Rs 25 lakh. According to media reports, according to the announcement made by Finance Minister Nirmala Sitharaman in the Parliament on February 1, 2023, in the annual budget for the financial year 2023-24, the Ministry of Finance has decided to meet retirement age for private sector salaried employees. The tax exemption limit on cash in lieu of holiday has been increased to Rs 25 lakh.
At present, tax exemption is available only on three lakhs.
According to media reports, till now the limit of tax exemption on non-government (private sector) employees for leave encashment i.e. cash received in lieu of holidays was only Rs. This limit was fixed in the year 2002, when the highest basic salary in the government sector used to be Rs 30,000 per month.
Applicable from April 1, 2023
A statement issued by the Central Board of Direct Taxes (CBDT) on Thursday said that the total limit of tax exemption under section 10(10AA)(2) of the Income Tax Act shall not exceed Rs 25 lakh. This section deals with payments received from employers to non-government employees. The CBDT said that the system of tax exemption on a maximum amount of Rs 25 lakh received by non-government employees in lieu of leave encashment will be applicable from April 1, 2023. The announcement in this regard was made in the budget proposal for the financial year 2023-24.
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Nirmala Sitharaman had announced in the budget itself
Finance Minister Nirmala Sitharaman had said in her budget speech that the tax exemption limit on the amount received as leave encashment for non-government sector employees would be increased from Rs 3 lakh to Rs 25 lakh. In line with the announcement made in the budget, the Finance Ministry has increased the tax exemption limit on cash amount in lieu of retirement leave for private sector salaried employees to Rs 25 lakh.
