The tax exemption on non-government employee employee holiday collection (in respect of holiday time earned to his credit upon retirement, whether in retirement or otherwise) was previously up to a limit of Rs.3 lakh only under section 10(10AA)(ii) of the Income Tax Act 1961 (the Act).
Pursuant to the proposal in Mr FM’s Budget Speech, 2023, the Central Government has notified the raising of the limit for tax exemption on retirement or non-retirement holiday collection of non-government employees to Rs. 25 lakh wef 01.04.2023.
The aggregate amount exempt from income tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs. 25 lakh if such payments are received by a non-government employee from more than one employer in the same previous year.
Also, the amount exempt from income tax under section 10(10AA)(ii) of the Act shall not exceed the limit of Rs. 25 lakh as reduced by the tax exemption already permitted in the employee’s total income under section 10(10AA)(ii) of any previous year or years.
Notification n.31/2023 dated 24.05.2023 has been published and is available on https://egazette.nic.in.