New Delhi, Aug. 27 -- Retirees who could claim just Rs.3 lakh as leave encashment tax exemption before 2023 may now have an opportunity to seek relief. The Income Tax Appellate Tribunal (ITAT), Chennai, said in a recent order that the enhanced Rs.25 lakh exemption limit introduced on May 24, 2023 can be applied retrospectively.

In an order dated June 12, 2026, the ITAT noted that both PSU (public-sector undertaking) and private-sector retired employees can benefit from the enhanced leave encashment exemption limit, including those who had already paid tax on leave encashment exceeding Rs.3 lakh.

The higher limit of leave encashment tax exemption applies to the period of earned leave in the credit of the employee at the time of retiremen...