The Central Board of Direct Taxes (CBDT) has increased the tax exemption limit for gratuity/leave encashment to ₹25 lakh for salaried employees on superannuation/ retirement.
The revision in the amount was made by the Ministry of Finance through a notification dated 18 February 2021. The limit was earlier Rs 10 lakh. Therefore, to provide tax exemption to the amount received by the employee at the time of retirement as leave encashment was needed to be revised.
All-India Government Employees’ Confederation (AIGEC) welcomed the decision to increase the exemption limit of encashment received on retirement of salaried employees from Rs 10 lakh to Rs 25 lakh.
This increase in the tax exemption limit will benefit a large number of salaried persons. They will now be able to save more on the tax as the amount received by way of leave encashment up to ₹25 lakh will be exempt from income tax.