Winning Bizness Desk

Mumbai. The Union Finance Ministry has given a big relief to the working class working in the offices of private companies by hiking the tax exemption limit on Leave Encashment. Now this tax exemption has been increased to Rs 25 lakh. till now, the tax exemption on leave encashment of employees working in private companies was only three lakh rupees. In respect of the period of leave earned against the employees' credits at the time of retirement, the tax relief at the time of retirement was up to three lakhs. Now this tax exemption limit has been raised to Rs 25 lakh. This tax relief has been implemented from April 1, 2023.

FM announced this in budget

Finance Minister Nirmala Sitharaman had announced this tax relief while presenting the Artha Sankalp in the month of February. After that, the Finance Ministry issued a notification on Thursday regarding tax relief. The total amount exempted from income-tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs 25 lakhs. It has also been clarified that the relevant amount should not have been received from more than one company. Finance Minister Nirmala Sitharaman in her budget speech had said that in 2002, a limit of Rs 3 lakh was fixed for tax relief on leave cash on retirement of salaried employees of private companies. At that time, the basic salary in government service was 30 thousand rupees per month. Nirmala Sitharaman said in her speech that this tax exemption limit is being increased to Rs 25 lakh in accordance with the same salary increase.

What is Leave Encashment?

Private companies give some paid leave to their employees every year. After retirement or resignation from the job, the employee gets the money in lieu of the remaining leave. This is called Leave Encashment. The employee gets the benefit of this tax relief only when he changes job or retires. If a private employee takes cash in lieu of leave during employment, this leave cash will be taxed as before.