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Leave Encashment

Leave encashment is taxed differently for government and non-government employees. For government employees, encashment during service is taxable while encashment during retirement is exempt. For non-government employees, encashment during service and retirement is taxable, but retirement encashment is exempt up to the lowest of average monthly salary over last 12 months, actual amount received, or cash equivalent of 30 days salary for each year of service. The exemption limit applies to total payment from multiple employers in the same or different years.

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Paramita Sarkar
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953 views1 page

Leave Encashment

Leave encashment is taxed differently for government and non-government employees. For government employees, encashment during service is taxable while encashment during retirement is exempt. For non-government employees, encashment during service and retirement is taxable, but retirement encashment is exempt up to the lowest of average monthly salary over last 12 months, actual amount received, or cash equivalent of 30 days salary for each year of service. The exemption limit applies to total payment from multiple employers in the same or different years.

Uploaded by

Paramita Sarkar
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOC, PDF, TXT or read online on Scribd
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Leave Encashment Leave Encashment is taxed differently for following types of employees.

Government employees: Leave encashed during the continuation of service is taxable . Leave encashed at the time of retirement or superannuation (leaving the job) is exempt from tax. Non-Government employees: Leave encashed during the continuation of service is taxable. In case of leave encashed at the time of retirement or superannuation (leaving the job) the exemption is limited to the least of the following: ! month"s average salary# $s. %&'!&!!!# (mount actually received )ash e*uivalent of leave salary standing to his credit not exceeding +! days for each year of actual service . ,he limit on exemption is applied on the total payment received towards leave encashment from two or more employers& in the same year or in different years. -alary means last drawn salary and includes basic salary and dearness allowance if terms of employment so provide and also includes commission based on a fixed percentage of turnover. (verage -alary is calculated on the basis of average salary for the ! months immediately preceeding the retirement or superannuation.

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