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Nov 12, 2025
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Retired employee denied tax exemption on Rs 13 lakh leave encashment, ITAT Jaipur restores tax benefit under new Rs 25 lakh limit
Mr. Vashistha, a retired employee of the State Bank of India from Jaipur, had to file a case in the Income Tax Appellate Tribunal (ITAT) after the income tax department denied him a higher tax exemption of Rs 25 lakh for leave encashment. What happened here was Mr. Vashistha got Rs 13 lakh as part of his retirement benefits (leave encashment) and he claimed tax exemption for the entire amount. For the uninititated, at present up to Rs 25 lakh is tax exempt for leave encashment, but earlier it was Rs 3 lakh.
On November 3, 2021, the income tax department issued him a Section 143(1) notice denying the higher tax exemption of Rs 25 lakh for leave encashment. Although he challenged this tax notice in CIT (A), he ended up losing the case there.
The ITAT Jaipur noted that the only submission put forth by Vashistha’s authorised representative was that he received Rs 13 lakh (13,05,810) as leave encashment benefit under Section 10(10)AA of the Income Tax Act, 1961.
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