Tax Exemption: The Modi government has provided significant relief to the common people, which will positively impact millions of individuals across the country.
Moreover, employees working in the private sector will also benefit from this decision. As per the budget announcement, the Finance Ministry has raised the tax exemption limit on cash received in exchange for unused leaves for private sector employees to Rs 25 lakh.
Until now, non-government employees were only allowed to receive a tax exemption on a maximum of three lakh rupees for leave encashment, which means the cash received in exchange for unused holidays. This limit was set back in 2002 when the highest basic pay in the government sector was only Rs 30,000 per month. However, in a recent statement by the Central Board of Direct Taxes (CBDT) on Thursday, it was announced that the total tax exemption limit under section 10(10AA)(2) of the Income Tax Act will now be capped at Rs 25 lakh.
25 Lakh Rupees
This particular section pertains to the payment received by non-government employees from their employers. The CBDT stated that the new system of tax exemption, allowing a maximum amount of Rs 25 lakh for leave encashment, will be effective from April 1, 2023. This announcement was made during the budget proposal for the financial year 2023-24 presented by Finance Minister Nirmala Sitharaman.
During her budget speech, Finance Minister Nirmala Sitharaman made various significant announcements. One of them was the increase in the tax exemption limit for leave encashment for non-government sector employees, which was raised from Rs 3 lakh to Rs 25 lakh.