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So far, the tax exemption on leave encashment for non-government employees was Rs 3 lakh which was fixed in 2002, when the highest basic pay in the government was Rs 30,000 per month.
The Central Board of Direct Taxes (CBDT), in a statement, said the aggregate amount exempt from income tax under section 10(10AA)(ii) shall not exceed the limit of Rs 25 lakh, where any such payments are received by a non-government employee from more than one employer.
The increased 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.
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In 2023-24 Budget, finance minister Nirmala Sitharaman had increased the tax exemption on leave encashment on retirement of non-government salaried employees to Rs 25 lakh, from Rs 3 lakh.