In a move that will benefit millions of individuals across the country, the Modi government has introduced a welcome change to income tax regulations.
This development particularly favors private sector employees, aligning with the government’s budgetary commitments.
The Finance Ministry has now increased the tax exemption limit for leave encashment payments in the private sector to Rs 25 lakh.
Previously, non-government employees were only allowed a tax exemption of up to three lakh rupees for such payments.
It’s important to note that this limit was set back in 2002 when the maximum basic pay in the public sector stood at a mere Rs 30,000 per month.
According to a statement issued by the Central Board of Direct Taxes (CBDT) on Thursday, the total tax exemption under section 10(10AA)(2) of the Income Tax Act will not exceed Rs 25 lakh.
This section pertains to payments received by non-government employees from their employers.
Effective from April 1, 2023, the new tax exemption system will apply to leave encashment payments of up to Rs 25 lakh for non-government employees.
This revision was initially proposed in the budget for the fiscal year 2023-24 and has now been implemented.
During her budget speech, Finance Minister Nirmala Sitharaman emphasized the importance of this change.
stating that the tax exemption limit for leave encashment in the non-government sector would increase from Rs 3 lakh to Rs 25 lakh.
This announcement brings relief to private sector employees, offering them greater financial benefits.
Please note that while the information provided above has been rephrased in simpler language, the core details and terminology have been retained to ensure accuracy.
