In the Union Budget 2023, Finance Minister Nirmala Sitharaman announced that the government would hike the tax exemption limit for leave encashment on retirement of non-government salaried employees to ₹25 lakh from ₹3 lakh. This means that retirees who have accumulated leave encashment up to 10 months of their average salary will now be able to encash it without paying any tax.
The previous limit of ₹3 lakh was set in 2002, and it has not been revised since then. This means that the value of the ₹3 lakh limit has eroded over time due to inflation. The new limit of ₹25 lakh is more in line with the current cost of living, and it will provide much-needed relief to retirees who are struggling to make ends meet.
The changed tax treatment, which will be effective from April 1, 2023, could benefit 50% of personal income taxpayers, who are salaried workers, as per Revenue Department estimates. The new treatment would allow salaried workers to encash their leave without paying tax. This would provide much-needed relief to salaried workers, who often have to accumulate a lot of leave due to the demands of their jobs. The new treatment is expected to benefit an estimated 50% of personal income taxpayers, who are salaried workers.
The government’s decision to hike the tax exemption limit for leave encashment is a welcome move. It will help to improve the financial security of retirees and make it easier for them to transition into retirement. The move is also in line with the government’s goal of providing social security to its citizens.
Here are some of the key points to remember about the new tax exemption limit for leave encashment on retirement:
- The exemption is available to all non-government salaried employees who retire on or after April 1, 2023.
- The exemption is available for leave encashment up to 10 months of the employee’s average salary.
- To claim the exemption, the employee will need to provide their employer with a certificate from their doctor stating that they are fit to retire.
- The employer will then need to issue a certificate to the employee stating the amount of leave encashment that is being paid.
- The employee will then need to file their income tax return and claim the exemption.
These measures will go a long way in improving the quality of life of retirees in India.
The government’s decision to hike the tax exemption limit for leave encashment is a positive step, and it will benefit millions of retirees across India. The move will help to improve their financial security and make it easier for them to transition into retirement.
