leave encashment tax treatment

[udit gupta]

What will be tax leave encashment of following condition:- 1. When emplyee retirment from service 2. During the Service. 3 Leaving the of service/ termination Example: Suppose A employee have 75 leave and basic salary of Rs. 200000 at the time of retirment/Leaving service/termination of service/During the service. please tell me what will be the tax of all condition. Regards Narendra

[CA Rachit Agarwal]

In all the cases

1. In hands of Employee: Exemption will be allowed upto 30 days of the last salary drawn. Salary means basic salary plus dearness allowance. Leave Encashment in excess of 30 days will be taxable.

[Surender Gupta]

For more details, please see Rule 2B of Income Tax Rules, 1962

[Surender Gupta]

For more details, please see Rule 2B of Income Tax Rules, 1962

AI Summary

Leave encashment exemption: specified period of last drawn salary exempt; any excess treated as taxable income. Leave encashment received on retirement, termination, resignation or during service is treated as salary but an exemption up to 30 days of the last drawn salary (basic salary plus dearness allowance) is available; amounts exceeding that exempted period are taxable.