In a move aimed at providing relief to salaried employees upon retirement, the Indian government has increased the income tax (IT) exemption limit for leave encashment to Rs 25 lakh. The revised exemption threshold, announced by the Ministry of Finance, is expected to benefit retiring employees by reducing their tax liability.
Leave encashment refers to the practice of monetizing accumulated leave days that an employee has not utilized during their service. This benefit allows employees to receive a lump sum payment for their unused leave days upon retirement or resignation.
Previously, the IT exemption limit for leave encashment stood at Rs 3 lakh. However, the significant increase to Rs 25 lakh brings much-needed relief to retiring employees by exempting a substantial portion of the leave encashment amount from income tax.Source:- business today
The decision to raise the exemption limit recognizes the evolving economic realities and the need to provide greater financial security to retired individuals. It aims to ensure that retiring employees can fully benefit from the leave encashment amount, enabling them to meet their post-retirement financial requirements more effectively.
The higher exemption threshold also aligns with the increasing cost of living, healthcare expenses, and lifestyle expectations in the modern era. By reducing the tax burden on leave encashment, the government intends to provide retirees with a cushion of financial support during their transition to post-employment life.
It’s important to note that the increased IT exemption limit for leave encashment will only apply to salaried employees and not to individuals in other categories, such as self-employed professionals or business owners.
The move has been widely appreciated by employees’ unions and retirement associations, who believe that the revised exemption limit will provide much-needed relief to retiring individuals. They contend that the increased threshold recognizes the value of accumulated leave and acknowledges the long years of service put in by employees.
As salaried employees plan their retirement, the revised IT exemption limit for leave encashment to Rs 25 lakh brings forth a positive change in their financial landscape. The increased threshold aims to ease the tax burden on retiring individuals, allowing them to utilize their leave encashment benefits more effectively and enhance their post-retirement financial well-being.
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