While presenting the Budget 2023, Finance Minister Nirmala Sitharaman had made a big announcement for the job seekers.
The Finance Minister had said that the scope of exemption of income tax on the money received by the salaried employees in lieu of holidays is being increased by more than 8 times. After this announcement, the employees were waiting as to when this announcement of the budget would be implemented in reality. At present, the government has approved it and the Income Tax Department has also started implementing it.
Tax expert says that this is a very good step in view of inflation. The scope of tax exemption was already very large for government employees who got money in lieu of holidays, now those working in the private sector will also be able to get the benefit.
It was announced in the budget that the tax exemption on leave encashment will now be up to Rs 25 lakh instead of Rs 3 lakh. Till now private sector employees used to get tax exemption only up to Rs 3 lakh on leave encashment, which has now increased more than 8 times.
Changes made after 20 years
Tax experts say that this decision will prove to be very beneficial in the interest of private sector employees. Earlier in 2002, this limit was kept that exemption up to Rs 3 lakh would be given on leave encashment. In view of inflation, this step of the government is commendable, now they will be given tax exemption on encashment up to 25 lakhs. In view of inflation, this is a very commendable decision of the government.
How to get this facility
Every company gives Earned Leave (EL) or Paid Leave (PL) to its employees. If this leave is left after the employee retires or leaves the company, then they are paid cash in lieu of it. Government employees are already getting a tax exemption of Rs 25 lakh on leave encashment, but this rule was not applicable to the private sector. The Finance Minister had said in the budget speech that now the private sector will also be given tax exemption on leave encashment up to 25 lakhs instead of 3 lakhs like government employees.