New Delhi, Aug. 27 -- Retirees who earlier received only Rs.3 lakh in leave encashment tax exemption before 2023 may now qualify for relief. The Income Tax Appellate Tribunal (ITAT), Chennai, ruled in a recent order that the enhanced Rs.25 lakh exemption limit, introduced on 24 May 2023, can be applied retrospectively.

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

The Central Board of Direct Taxes (CBDT) has clarified in its 2023 notification that the higher exemption applies to earned leave credited at the time of retirement, whether on s...