TaxTMI 
TaxTMI 
Whether employees of Nationalised Banks and Public Sector Undertakings are Government Employees ? And Leave Salary Encashment received by them is fully exempt or exempt upto specified Limit.
Exemption of leave encashment to Bank Employee or PSU
20 Aug 2025 
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Leave salary encashment for bank and PSU employees is capped under the statutory exemption, not fully exempt like government servants.
Employees of nationalised banks and public sector undertakings are not treated as Central or State Government employees for income-tax purposes; consequently, leave salary encashment received by such employees on retirement is eligible for exemption under section 10(10AA) only up to the limit prescribed by executive notification, rather than enjoying the full exemption applicable to Central/State Government employees. (AI Summary)
Employees of nationalised banks and public sector undertakings are not treated as Central or State Government employees for income-tax purposes; consequently, leave salary encashment received by such employees on retirement is eligible for exemption under section 10(10AA) only up to the limit prescribed by executive notification, rather than enjoying the full exemption applicable to Central/State Government employees. (AI Summary)