For retirees, leave encashment now tax-free till ₹25 lakh
The Hindu
The government has notified a hike in the tax exemption limit for leave encashment benefits received by salaried employees at the time of retirement from ₹3 lakh to ₹25 lakh, as promised in the Union Budget.
The government has notified a hike in the tax exemption limit for leave encashment benefits received by salaried employees at the time of retirement from ₹3 lakh to ₹25 lakh, as promised in the Union Budget.
The changed tax treatment, which will be effective from April 1, 2023, could benefit 50% of personal income tax payers, who are salaried workers, as per Revenue Department estimates.
Union Finance Minister Nirmala Sitharaman had noted during her Budget 2023-24 speech that the limit of ₹3 lakh for tax exemption on leave encashment on retirement of non-government salaried employees was last fixed in the year 2002, when the highest basic pay in the government was ₹30,000 per month. “In line with the increase in government salaries, I am proposing to increase this limit to ₹25 lakh,” she had said.
Revenue Secretary Sanjay Malhotra had told The Hindu that this tax exemption hike would effectively translate into potential savings of ₹7 lakh in taxes that would have been payable before this amendment.
“That is almost ₹20,000 of savings a year over a 33-year working life,” he had pointed out. Employees who switch to the new exemption-free income tax regime in the year of their retirement will also benefit from this change, Mr. Malhotra said.
The decline in India’s net foreign direct investment (FDI) inflows, which have dropped almost 31% to $25.5 billion over the first ten months of 2023-24, is in line with the slowdown in such investments to developing countries, the Finance Ministry has said, while holding out hope for an uptick in investments this year.