Leave Encashment Limit For Non-Government Employees Hiked

The limit was set at Rs 3 lakh earlier and has been increased to Rs 25 lakh now from April 1, 2023.

<div class="paragraphs"><p>(Source: Unsplash)</p></div>
(Source: Unsplash)

The Central Board of Direct Taxes has notified the increase in the limit of leave encashment by non-government or private employees on superannuation, offering relief to taxpayers.

The limit, set at Rs 3 lakh earlier, has been increased to Rs 25 lakh as of April 1, 2023. This limit will be applicable under both the new and old tax regimes.

The increase in exemption of the tax limit was announced in the budget 2023. According to the rule, individuals retiring on or after April 1, 2023, will get the benefit of the enhanced cap. The CBDT notification on Wednesday mentions that no person is adversely affected by giving retrospective effect to this notification.

During the budget speech, Finance Minister Nirmala Sitharaman said the leave encashment limit was last fixed in 2002, when the highest basic pay for employees was Rs 30,000 per month. The limit has been increased, keeping in mind the general increase in monthly salary from 2002 to 2023.

Salaried employees are entitled to a minimum number of paid leaves every year. However, it is not always possible to utilise all the leaves entitled to employees in a single year. A lot of employees carry forward their leaves and encash them during retirement or while resigning from the company.