Section 10(10AA) → Section 19 (Sl. 13–14)

Leave encashment on retirement — ₹25 lakh limit

Section 10(10AA) of the old Income-tax Act, 1961 · new section 19 (Sl. 13–14) under the Income-tax Act, 2025

New reference Section 19(1), Table Sl. Nos. 13–14 and 19(2)(f)

Income-tax Act, 1961Section 10(10AA)

10(10AA)(i): Government employees — fully exempt
10(10AA)(ii): others — least of actual, 10 months' average salary, cash value of leave (max 30 days per year of service), ₹25 lakh
₹25 lakh from 1 April 2023 (Notification 31/2023; earlier ₹3 lakh); lifetime limit
Leave encashed during service is fully taxable

Applies to FY 2025-26 (AY 2026-27) and earlier years.

Income-tax Act, 2025Section 19(1), Table Sl. Nos. 13–14 and 19(2)(f)

Sl. No. 13: Central/State Government employees on retirement — entire amount
Sl. No. 14: others — least of cash equivalent of leave (max 30 days per year), 10 × average monthly salary of last 10 months, notified limit (₹25 lakh), actual amount
19(2)(f): limit reduced by amounts exempted in earlier years — lifetime cap across employers
Salary = basic + DA (if part of retirement benefits) (19(2)(b))

Applies from tax year 2026-27 (from 1 April 2026).

What changed

Renumbered from section 10(10AA) into the section 19 table; formula unchanged. The ₹25 lakh limit (Notification 31/2023, 24 May 2023) continues under section 536(2)(j).

Practice notes

Available under both regimes.
Note on form: in the 2025 Act these are deductions in computing salary (section 19 table), not exemptions under section 10 — the effect is the same.
Leave encashment received while in service is taxable; relief under section 157 (old 89) may apply if it pushes income into a higher slab.

These are summaries, not the statutory text. Read the bare Act for both sections on the Income Tax Department's official site, which also has a side-by-side comparison utility.

Frequently asked

What is section 10(10AA) in the new Income Tax Act?

Section 19(1), Table Sl. Nos. 13–14 of the Income-tax Act, 2025.

What is the leave encashment exemption limit for 2026-27?

₹25 lakh (lifetime) for non-Government employees on retirement; Government employees fully exempt. Available in the new regime too.

What changed in section 10(10AA) under the new Income Tax Act?

Renumbered from section 10(10AA) into the section 19 table; formula unchanged. The ₹25 lakh limit (Notification 31/2023, 24 May 2023) continues under section 536(2)(j).

Is section 10(10AA) still applicable for FY 2025-26?

Yes. Income of FY 2025-26 (AY 2026-27) and earlier years is governed by section 10(10AA) of the 1961 Act. Section 19 (Sl. 13–14) of the 2025 Act applies from tax year 2026-27.

Related sections

16→19Deductions from salary: standard deduction, professional tax (and gratuity exemption)10(10)→19Gratuity exemption — ₹20 lakh limit 89→157Relief when salary or family pension is received in arrears or in advance