Notification of Increased Cap on Non-Governmental Paid Employees’ Tax Exemption for Encashment of Leaves

The Hon’ble Finance Minister announced in the Budget Speech 2023 a rise in the tax exemption ceiling on leave encashment for salaried non-governmental employees. This hike was effective from April 1, 2023.

• It was earlier up to the limit of Rs. 3 lakhs under Section 10 (10AA) (ii) of the Income Tax Act, 1961, and the new maximum is Rs. 25 lakhs.
• The amount exempted shall be at most Rs. 25 lakhs if a non-governmental employee receives it from more than one employer in the same previous year.
• Furthermore, the amount exempted shall not exceed Rs. 25 lakhs from the employee’s total income of any previous year.

Conclusion

The enhanced tax exemption ceiling on leave encashment is a pleasant comfort. Thanks to this boost, employees will be able to keep more of their hard-earned money. When filing your income tax return, non-governmental paid employees should claim the higher tax exemption limit if they received leave encashment during the fiscal year 2022-23.