When Mrs Moongia from Adresh Nagar retired from LIC on June 30, 2020, she got Rs 9.04 lakh as leave encashment, along with other retiral benefits. However, while filing her income tax return (ITR), Mrs Moongia claimed full income tax exemption on the full leave encashment amount of Rs 9.04 lakh. Mrs Moongia was not aware that LIC employees are non-government employees and in 2020, she could have claimed only Rs 3 lakh tax exemption on leave encashment.
(FYI: In Budget 2023, the tax exemption on leave encashment was increased to Rs 25 lakh for non-government employees)
