Revenue Secretary Sanjay Malhotra | Photo Credit: PTI
Leave encashment benefit received by the salaried class on retirement, the limit of which has been increased from ₹3 lakh to ₹25 lakh in the budget, will be tax-free in their hands under the new income tax regime, irrespective of the year of retirement, Revenue Secretary Sanjay Malhotra told Hindu on Monday.
“If you ask how this helps the middle class, 50% of individual income tax payers are salaried and will benefit from higher leave encashment limits at the time of retirement, whether they choose the new tax regime now or the old one today…that’s how many All the people are missing,” Mr Malhotra said, dismissing criticism of the limited benefits for the middle class beyond the new tax system.
“So it benefits all the salaried class… There is something for them which they are not realizing today. But everyone has to retire one day or the other and I am sure the year they retire, they all will opt for the new system. On increase in limit by ₹ 22 lakh. “This is a savings of around ₹20,000 a year over a working life of 33 years,” he said.
He added that most of the non-salaried employees would also be shifted to the new system. Mr Malhotra said only those salaried people who are getting substantial tax-exempt House Rent Allowance (HRA) or some who have taken home loans will not shift to the new tax regime.
“But non-salaried people do not have HRA, so mostly they will also shift. So 50% salaried, whether they shift or not, is a gain and most of the non-salaried will shift, salaried whether they shift or not, for them that is something they are not realizing today. But one day everyone will retire.
The Revenue Secretary acknowledged that the leave encashment benefit may not be available to all salaried employees at present. “But now that the benefits are there, I am pretty sure the companies will restructure their pay structure,” he concluded.