CBDT Announces Higher Limit for Tax Exemption on Retirement Benefits

The Ministry of Finance, Department of Revenue, Central Board of Direct Taxes in the Government of India has issued a press release announcing an increase in the tax exemption limit for leave encashment for non-government salaried employees.

Previously, the tax exemption limit was set at Rs. 3 lakh under section 10(10AA)(ii) of the Income-tax Act, 1961. However, as per the proposal in the Budget Speech 2023, the limit has been raised to Rs. 25 lakh, effective from April 1, 2023.

Increased limit for tax exemption on leave encashment for non-government salaried employees notified

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes

New Delhi, 25th May, 2023

PRESS RELEASE

Increased limit for tax exemption on leave encashment for non-government salaried employees notified

The tax exemption on leave encashment of non-government salaried employees (in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise) was earlier upto a limit of Rs.3 lakh only under section 10(10AA)(ii) of the Income-tax Act,1961(the Act).

In pursuance to the proposal in the Budget Speech, 2023, by the hon’ble FM, 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 aggregate amount exempt from income-tax under section 10(10AA)(ii) of the Act 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 in the same previous year.

Further, the amount exempt from income-tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs. 25 lakh as reduced by the tax exemption already allowed in the total income of the employee under section 10(10AA)(ii) of any previous year or years.

Notification No.31/2023 dated 24.05.2023 has been published and is available at https://egazette.nic.in.

(Surabhi Ahluwalia)
Pr. Commissioner of Income Tax
(Media & Technical Policy) &
Official Spokesperson, CBDT

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