CBDT vide Notification No.31/2023 dated 24.05.2023 in S.O. 2276(E) notified an increased limit for tax exemption on leave encashment for non-government salaried employees from Rs. 3 Lakh to Rs. 25 Lakh under section 10(10AA) of the Income-tax Act,1961 (‘Act’). The exemption is available only in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise.
This increase in the exemption limit of leave encashment notification shall come into effect from 1st April, 2023 or FY 2023-24 (AY 2024-25).
The tax exemption on leave encashment of non-government salaried employees (in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise) was earlier upto a limit of Rs.3 lakh only under section 10(10AA)(ii) of the Act.
The increase in the exemption limit is notified in pursuance to the proposal in the Budget Speech, 2023, by the Hon’ble FM, the Central Government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to Rs. 25 lakh w.e.f. 01.04.2023.
The aggregate amount exempt from income-tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs. 25 Lakh where any such payments are received by a non-government employee from more than one employer in the same previous year.
Further, the amount exempt from income-tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs. 25 Lakh as reduced by the tax exemption already allowed in the total income of the employee under section 10(10AA)(ii) of any previous year or years. In other words, the exemption limit of Rs. 25 Lakh on leave encashment is the limit for the lifetime of the employee.
In this regard, CBDT has released a Press Release dated 25.05.2023 which reads as under-
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
******
New Delhi, 25th May, 2023
PRESS RELEASE
Increased limit for tax exemption on leave encashment for non-government salaried employees notified
The tax exemption on leave encashment of non-government salaried employees (in respect of the period of earned leave at his credit at the time of his retirement, whether on superannuation or otherwise) was earlier upto a limit of Rs.3 lakh only under section 10(10AA)(ii) of the Income-tax Act,1961(the Act).
In pursuance to the proposal in the Budget Speech, 2023, by the hon’ble FM, the Central Government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to Rs. 25 lakh w.e.f. 01.04.2023.
The aggregate amount exempt from income-tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs. 25 lakh where any such payments are received by a non-government employee from more than one employer in the same previous year.
Further, the amount exempt from income-tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs. 25 lakh as reduced by the tax exemption already allowed in the total income of the employee under section 10(10AA)(ii) of any previous year or years.
Notification No.31/2023 dated 24.05.2023 has been published and is available at https://egazette.nic.in.
(Surabhi Ahluwalia)
Pr. Commissioner of Income Tax
(Media & Technical Policy) &
Official Spokesperson, CBDT
Download CBDT Press Release dated 25.05.2023 on the Increased tax exemption limit of Rs. 25 Lakh on leave salary encashment in PDF format
Notification No. 31/2023
Read the full text of CBDT Notification No. 31/2023 dated 24.05.2023 on Leave Salary Exemption Limit u/s 10(10AA)
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 24th May, 2023
(INCOME-TAX)
S.O. 2276(E).—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.
2. This notification shall be deemed to have come into force with effect from the 1st day of April, 2023.
[Notification No. 31/2023/F. No. 200/3/2023-ITA-I]
SOURABH JAIN, Under Secy.
Explanatory Memorandum : It is hereby certified that no person is being adversely affected by giving retrospective effect to this notification
 to Rs. 25 Lakh from Rs. 3 Lakh){kind=link}
1 Comments
Whether retirees before 01/04/2023 can claim refund of tax from income tax department. Please explain.
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