Question
How is leave encashment taxed for private employees?
Answer
Bottom line: For non-government employees, leave encashment at retirement or resignation is exempt up to ₹25,00,000.
1. The limit
The Section 10(10AA) exemption was raised to ₹25 lakh (from ₹3 lakh) with effect from 1 April 2023.
2. Lifetime cap
The ₹25 lakh is an aggregate across employers — exemption already used reduces what is left.
3. Government employees
Their leave encashment is fully exempt.
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This answer is general information based on the law as it stood when written and is not professional advice on your specific situation. Verify the current position and consult a qualified professional before acting. See our disclaimer.