Federation of Indian Export Organisations (FIEO) has in a memorandum to Union Finance Minister requested for the removal of the anomaly in levying of tax on leave encashment for retiring non-government employees.

Besides treating non-government employees on par with government employees with regard to tax on leave-salary, the government should also consider removing the present cap of ₹3 lakh.

Section 10 (10AA (i)) of the Income Tax Act provides complete exemption from income tax to central and State government employees on any amount received as cash equivalent of leave salary at the time of retirement.

However, Section 10 (10AA (ii)) provides exemption to non-government employees (for cash equivalent of leave salary) up to a maximum of ₹3 lakh. The limit was fixed in 1998.

For uniformity and simplicity, any cash equivalent of leave salary should be fully exempt from income tax without any limit has been the case for Central government/State government employees, the federation said in its appeal.