Best answer: What is the tax on leave encashment?

(i) Leave Encashment during service is fully taxable in all cases, relief u/s 89(1) if applicable may be claimed for the same. (ii) Any payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.

How is tax on leave encashment calculated?

Leave encashment received by Non-Government employee is exempt based on the computation provided under Section 10(10AA)(ii) and balance amount if any is taxable as ‘income from salary’

Leave encashed at the time of retirement or resignation.

Particulars Amount
Leave encashment taxable – (A) – (B) XXXX

How much amount of leave encashment is tax free?

Tax Treatment of Unavailed Leaves Encashed

Leave salary encased during the period of service is fully taxable. Exempt from tax to the extent of least of the following: Three lakh rupees.

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What is leave encashment in income tax?

Leave encashment refers to an amount of money received in exchange for a period of leave not availed by an employee. Encashment of accumulated leave can be availed by an employee at the time of retirement, during the continuation of service or at the time of leaving the job.

Is leave encashment taxable on resignation for private employees?

If a person is working in the private sector, the leave encashment after retirement or resignation is taxable as “Income from salary”. However, certain tax exemptions are provided under Section 10(10AA).

What is the maximum limit of leave encashment?

For employees who have retired after 1998, their leave encashment amount is subjected to a maximum limit of Rs. 3, 00,000 to be received which is specified by the government. When the actual amount to be received will be more than Rs.

Is leave encashment on basic or gross?

Leave encashment is only on Basic part. You may confirm form your HR depending on the policies of your company.

How is 10 days leave encashment for LTC calculated?

7th CPC Leave Encashment Calculation Formula

  1. Earned Leave = [(Basic Salary + DA) / 30] x No of days.
  2. Hal Pay Leave = [(Half Pay Leave Salary + DA) / 30] x No of days.

Is leave encashment taxable under new tax regime?

Many companies encash the unused leaves at the time of retirement of their employees. The limit to avail tax benefits for leave encashment by non-government employees is up to Rs. 3 lakh. Even in the new regime, a taxpayer will continue to avail of tax exemption for the same.

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Where is gratuity exemption in income tax return?

On the ITR-1 form, enter the gratuity amount as income after deducting the exempted amount, the same exempted amount to be entered in ‘Exempt Income’ section for verification.

What is encashment?

encash. verb [ T ] /ɪnˈkæʃ/ us. to exchange a cheque or a financial product such as a bond for money: If you encash your investment before the end of the term, you pay a £30 administration fee.

What is section 10 exemption in income tax?

Section 10 of the Income Tax Act allows the computation of specific incomes as tax-free. As per the Income Tax Act, 1961, every Indian citizen who earns above a certain threshold of income is liable to pay taxes.

Can I encash my annual leave?

You can either encash or clear your annual leave if your employment was terminated. If the unused leave is encashed, it should be calculated at the gross rate of pay based on your last drawn salary. However, if an employee is terminated for misconduct, any unused leave will be forfeited.

Is leave encashment taxable for bank employees?

leave encashment at the time retirement by bank employees is fully exempt.

How is leave encashment exemption calculated?


  1. Leave encashment actually received i.e. Rs. 10,00,000.
  2. 10 months average salary @ (50,000+20,000) i.e. 70,000 PM x 10 months = 7,00,000.
  3. Cash equivalent of unavailed leave on the basis of 30 days leave for every completed year of service = 30 days x 30 years = 900. Less: Already availed = 600. …
  4. Rs. 3,00,000.


How many leaves can be encashed?

According to the Income-tax Act, 1961, in case you get such a facility, then the maximum number of leaves you can encash in a year is 30,” said Anuj Shah, chief financial planner, Wealth 360, a Mumbai-based financial planning firm.

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