So far, the tax exemption on leave encashment for non-government employees was Rs 3 lakh which was fixed in 2002, when the highest basic pay in the government was Rs 30,000 per month.

The Central Board of Direct Taxes (CBDT), in a statement, said the aggregate amount exempt from income tax under section 10(10AA)(ii) shall not exceed the limit of Rs 25 lakh, where any such payments are received by a non-government employee from more than one employer.