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Asked by Harish on :Jun. 26, 2015

Is leave encashment taxable as salary?

Is leave encashment taxable as salary?

Is leave encashment taxable as salary?

0

Chiranjibi Aug. 28, 2018

No tax exemption is available for earned leave encashed during the service period. The amount of earned leave you encash will be taxable as salary income in your hands.

The encashment of earned leave at the time of retirement is exempt from tax, subject to certain conditions and up to a maximum amount of Rs 3 lakh.

The total amount of earned leave will be calculated as 30 days leave for every one year of completed service. The average salary for the past 10 months is taken into account for calculating the encashment amount.

At the time of retirement, the amount of leave encashed during the service period will be reduced from the total amount calculated.

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