Leave encashment exemption limit enhanced retrospectively, extending the revised ceiling to private employees under tax law.

Leave encashment exemption under Section 10(10AA) was held to extend to non-government retired employees up to the revised limit of Rs. 25,00,000, following the CBDT notification dated 24.05.2023. The Tribunal applied earlier co-ordinate bench rulings that treated the enhancement as retrospective from 01.04.2023 and applicable to private employees as well, so the earlier ceiling of Rs. 3,00,000 was no longer sustainable. On that basis, the disallowance made by the lower authorities was deleted and the assessee was entitled to exemption within the revised limit.

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Issues: Whether the assessee, a non-government retired employee, was entitled to exemption on leave encashment beyond Rs. 3,00,000 under Section 10(10AA) of the Income-tax Act, 1961 in view of the CBDT notification enhancing the limit to Rs. 25,00,000.

Analysis: The Tribunal noted that the controversy stood covered by earlier co-ordinate bench decisions holding that the notification dated 24.05.2023 enhanced the limit for leave encashment exemption to Rs. 25,00,000 and was to be applied retrospectively from 01.04.2023. The Tribunal followed the earlier view that the revised limit applied to private employees as well, and that the restriction to Rs. 3,00,000 was no longer sustainable.

Conclusion: The assessee was entitled to exemption of the leave encashment amount under Section 10(10AA) within the revised limit, and the disallowance made by the lower authorities was deleted.

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