in Finance, Income Tax, India

Leave encashment non taxable

As per section 10(10AA) of income tax in india, leave encashment amount received by employee by a previous employer in full and final statement, is non-taxable. So If you have changed a job in financial year and received leave encashment for the remaining earned leaves (ELs) Just deduct the amount from total income and compute the income tax on top of that.

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.

In case of other employees, the exemption is to be limited to minimum of all below:
1. The actual amount received
2. The cash equivalent of leave balance (max 30 days per year of service)
3. Maximum of 10 months of leave encashment, based on last 10 months average salary
4. Rs. 3 Lakhs

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  1. Sir,
    Please tell me our SBI employee got 598000 rs as leave encashment on retirement whether it taxable or not?? How much amount will liable for tax??

  2. Dear sir
    If the EL encashment drawn in the FY 16 -17 and the employee continues to work then is there be a tax exemption for EL encashment, assuming he/ she is s government employee.

  3. Dear Sir, I retired from PNB bank service after 38 yrs of Service. Leave 232 days encashed if exempted from ITax.

  4. Hi Sir,
    My father got retired as a central govt employee. And I just have a question regarding leave encashment is it taxable or non taxable. Please guide. TIA

  5. My company has considered leave encashment given on separation as taxable in the form 16 shared by them. No exemption was given u/s 10. Is it possible still claim exemption while from long ITR?

  6. I joined HPSEB during 1979 that time HPSEB was considered at par with State Government as most of the staffwas from Government Department.after the formation of HPSEB also central civil service Rules were applicable for HPSEB.After the enforcement of 2003 Bill all Electricity Boards were converted into Companies(State Government Undertaking)I retired from company during 2015.My query is this leaveencashm received at the time of my retirement is taxable in full or not

    s govern by central civil service Rules

  7. Dear Sir
    I am Abdul Zahoor from Al Khor , I am from India .Sir i have a quiery my passport is Ecr as i have not completed SSC .Sir can i convert my passport from ECR to ENCR as i have compelted more than 3 yrs in Abroad. (2 yrs in Bahrain ,9 month in Dubai and 1 yr and still in Qatar).Sir please guide me .
    Thanking you

    • @Abdul
      You can apply for passport reissue under ECNR category and submit passport copies showing date of entry and exit from India.
      If total stay outside India is more than 3 years, you would be eligible for ECNR.

  8. I am a PSU employee,retirring in July’18 .is the amount received by me on a/c of leave encashment is taxable or exempted what ever I get ??

  9. If a working government employee get leave encashment ( which includes basic pay,DA and HRA), then the HRA is tax exempted or not?