Is leave encashment exempt from tax?

Govt Employees (Central Govt and State Govt employees only): Leave encashment of accumulated leave at the time of retirement, whether on superannuation or otherwise, received by a Govt employee, is fully exempt from tax. No tax would be levied on any amount received as leave encashment by govt employees on retirement.

What is the limit of exemption for leave encashment during the continuance of employment?

Rs. 3,00,000
The notified maximum exemption limit of Rs. 3,00,000 is a whole life exemption limit for an employee in respect of leave encashment received at the time of leaving job.

What is the rule of leave encashment?

Therefore, members of the All India Services are entitled for encashment, of earned leave for 10 days each subject to the maximum of 60 days in the entire career; and a maximum of 300 days of earned leave on retirement/death under rule 20A of the All India Services(Leave) Rules, 1955.

Is it mandatory to encash leave?

However, there is no statutory or legal requirement for employers to offer leave encashment. How is it taxed? During service: Leave encashed during service is fully taxable and gets added to “income from salary” for taxation. This is applicable for government as well as private company employees.

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. Leave salary actually received.

How is exemption on leave encashment calculated?

Exemption under Section 10(10AA)

1. Rs. 3 lakh.
2. Actual leave encashment amount.
3. Average salary (basic salary + dearness allowance) of the last 10 months before the employee’s retirement or resignation.
4. Cash equivalent of pending leave days. The leave basis is a maximum of 30 days leave for every year of service.

How leave encashment is calculated?

The amount of Leave Encashment will be calculated as follows… Basic salary plus Dearness Allowance is divided by 30. The result multiplied with a number of days EL (Maximum 300 days). If any shortfall in EL, then take the Half Pay Leave for calculation subject to not exceeding 300 days.

How do I ask for leave encashment?

Subject: Application for Payment of Leave Encashment As, I have taken leave of few days and organize the whole event and I urgently need money. Kindly, grant my leave encashment of this year as soon as possible. It would be a great favor for me and my family. I will be very grateful to you.

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.

How do I write an earned leave application?

How to Write an Earned Leave Application

1. Address the letter to the connected authority who can approve your leave request.
2. Mention the dates from which date to which date you want the leave.
3. Write the reason for taking the leave.
4. Make you request to mark the leaves as earned leaves (privilege leaves).

What is cash encashment?

The act of paying a loan or other liability in cash, as opposed to some other means such as check or credit card.

How is leave encashment received exempt from tax?

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’. Formula for computing leave encashment exemption of Non-government employees: Particulars. Amount. Leave encashment received (A)

Is there an exemption for superannuation leave encashment?

Leave encashment at the time of retirement or superannuation or otherwise received by any other employee, is exempt to the extent of certain limit. Least of the following is exempt from tax- Leave Encashment actually received. 10 months average salary

When can an employee avail leave encashment?

In case an employee does not avail the leaves allowed to him, he can encash these leaves and earn a salary for the number of days. This policy of the number of leaves allowed to be taken and leave encash varies from employer to employer. When can an employee avail leave encashment?

What is the cash equivalent of leave encashment?

Cash equivalent of the leave salary in respect of the period of earned leave standing to the credit of employee at the time to retirement/superannuation (earned leave entitlements cannot exceed 30 days for every year of actual service rendered for the employer from whose service he has retired); (See Note- 1)