Leave Salary Encashment Exemption& Taxability | H&R Block

Leave Salary Encashment Exemption

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Leave Salary Encashment Exemption

Every organization offers certain number of paid leaves for its employees. Many times employees accumulate such paid leaves. If and when these leaves are en-cashed by the employee, there are tax implications on the same. In this article we will discuss leave encashment from taxability perspective.

Following points must be of prime consideration during leave encashment:

  • Encashment of leave during the period of employment is always taxable.
  • Leave encashment by government employee at the time of retirement or resignation from a job is tax-free.
  • For non- government employees can avail tax exemptions if leave encashment is done at the time of retirement or resignation from a job. The lowest amount from the following calculations will be exempted from tax:
  1. Period of earned leave in no. of months multiplied by average monthly salary. Maximum of 30 days of earned leave per year for completed years of service is taken into consideration.
  2. 10 times of average monthly salary.
  3. 3,00,000/-
  4. Or leave encashment actually received.

However, please note the below:

  1. If an employee receives leave encashment from more than one employer, the quantum of exemption will be computed independently in respect of each employer.
  2. The total amount of exemption should not exceed Rs.3,00,000/- during his lifetime.

As discussed in this article, it is always recommended to en-cash leave salary at the time of retirement or resignation from a job.

 

HRBlockIndia
HRBlockIndia
H&R Block India strives to blend tax expertise with a strong focus on continually improving the client experience to provide all its clients with an unparalleled value proposition for filing their Income Tax Online.

2 Comments

  1. Surinder Kumar says:

    I am going to be retire on march 2016 and my leave in encashment is approx . 8.50 lakh please guide whether there is any tax is so please give details of tax
    wasting for your reply
    Surinder kochhar

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