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In line with the Budget 2023 proposal, the finance ministry has notified the increased ceiling for encashment of earned leave that is exempt from income tax via a notification dated May 24, 2023. The change came into effect from April 1, 2023.
“In exercise of the powers conferred by sub-clause (ii) of clause (10AA) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government, having regard to the maximum amount receivable by its employees as cash equivalent of leave salary in respect of the period of earned leave at their credit at the time of their retirement, whether superannuation or otherwise, hereby specifies the amount of Rs. 25,00,000 (twenty-five lakhs rupees only) as the limit in relation to employees mentioned in that sub-clause who retire, whether on superannuation or otherwise.This notification shall be deemed to have come into force with effect from the 1st day of April, 202,” stated the finance ministry circular.
This move is a positive for non-government employees as they will benefit from increased tax exemptions for leave encashment paid against accumulated leave balances over time.
According to finance minister, Nirmala Sitharaman, in her Budget speech, “The limit of Rs.3 lakh for tax exemption on leave…
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