New Delhi: In line with the Budget announcement, the finance ministry on Thursday hiked the tax exemption limit for leave encashment upon retirement for private sector salaried employees to Rs 25 lakh.


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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.


"In pursuance to the proposal in the Budget speech, 2023,... The central government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to Rs 25 lakh w.E.F. 01.04.2023," the CBDT said.


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.