TDS on Unavailed Leaves Encashment

[Ashok Chopra]

Respected Forum,

At the time of full and final settlement (leaving service by giving resignation), an employee is being paid unavailed earned leaves for 90 days. 

Pls guide me, whether i should deduct TDS on it or it is 100% exempted from TDS.

No policy of the company to accumulate earned leaves, but we want to pay.

If no TDS is deducted, is there any liability on the company.

pls guide me accordingly

AI Summary

Leave encashment exemption: determine the least of leave cash equivalent, ten months' average salary, prescribed ceiling and amount received.
Exemption for cash payment of unavailed earned leave on leaving service is the least of the cash equivalent of earned leave standing to the employee, ten months' average salary, the prescribed monetary ceiling, and the amount actually received. Calculation steps: compute years of service (ignore fractions), apply the employer's leave credit rate capped at thirty days per year, subtract leave already taken or encashed and convert days to months, and compute average salary over the ten months preceding cessation including basic pay, dearness allowance where contractual, and fixed-percentage commission. Aggregation rules and death-related exemptions apply.