Following the announcement in the Budget, the finance ministry has raised the tax exemption threshold for leave encashment upon retirement for private sector employees to ₹ 25 lakh. Since 2002, when the highest basic pay in the government was ₹ 30,000 per month, the tax exemption limit for leave encashment among non-government employees had remained at ₹ 3 lakh.The Central Board of Direct Taxes (CBDT) issued a statement clarifying that the total amount exempt from income tax under section 10(10AA)(ii) should not exceed ₹ 25 lakh when non-government employees receive such payments from multiple employers.Effective from April 1, 2023, the enhanced tax exemption limit for leave encashment on retirement or other occasions will be applicable to non-government salaried employees.
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