New Encashment Rule: THESE Employees to Get Rs 20,000 Profit Per Year- Here's How

New Delhi: On February 1, Union Finance Minister Nirmala Sitharaman made a number of announcements during her yearly Budget speech. The new leave encashment exemptions, which generated headlines, were one of the big announcements. FM Sitharaman suggested increasing the tax exemption on leave encashment for non-government-paid workers who retire to Rs 25 lakh from Rs 3 lakh.

Sanjay Malhotra, the revenue secretary, stated to the Times of India days later that "the benefit of Rs 22 lakh at 30 percent plus comes out to roughly Rs 7 lakhs." According to Malhotra, the exemptions add up to more than Rs 20,000 per year if they are spread out over 30-35 years.

Malhotra estimates that the salaried class makes up 50 percent of personal income taxpayers. Therefore, whether people pick the new tax system now or the old today, the new leave encashment exemptions will help them when they retire.

He said that government employees, including those employed by AIIMS, will also profit from the new "leave encashment" exemption.

What is Leave Encashment?

Every salaried individual in India is entitled to a minimum number of paid leaves per year under the country's labour laws. However, an employee may not use all of those leaves in a given year.

These unused paid leaves are now typically rolled over to the following year. As a result, when an employee retires or resigns, they will have accumulated unused leave balances. The business is now required to reimburse the employees for any unused paid time off. This process is called leave encashment.