Leave Encashment: Good news for those doing private jobs, government gave important update on holiday money

If you too are thinking of retiring or changing jobs, then the government has given you a big gift. Till now the private sector employees were being given a rebate of up to Rs 3 lakh on leave encashment. But now the government has increased it to 25 lakhs.
The employee will get the benefit of this tax benefit when he changes his job or retires. On the other hand, if you are taking cash instead of leave during the job, then this leave encashment will be taxed as before.
If you save your holidays while working, then you get money in return at the time of retirement. This is called leave encashment.
You can avail of tax exemption up to Rs 25 lakh within a year. Think of it like this- Suppose you change your job in May, from where you get Rs 23 lakh as leave encashment. After this you go to another company and resign from that company in January, then there you get 3 lakh rupees as leave encashment.
In this way, your total leave encashment is 26 lakhs, in which you will get a tax exemption of 25 lakhs. You will have to pay tax on the remaining Rs 1 lakh.
India's Finance Minister Nirmala Sitharaman presented the budget on February 1 this year. In this budget, he presented a proposal to increase tax exemption for leave encashment for private sector employees from Rs 3 lakh to Rs 25 lakh.
A notification has been issued regarding this proposal on Thursday, 25 May 2023. It was informed that the limit of leave encashment has been increased from Rs 3 lakh to Rs 25 lakh. This decision has come into effect from 1 April 2023 i.e. 2023-2024 financial year.
Private companies give some paid leave to their employees every year. After retirement or resignation from the job, the employee gets money in lieu of the remaining leave. In the budget of February 1, 2023, the tax-free limit for leave encashment was fixed at Rs 3 lakh.