Hi there, Is leave encashment taxable? Regards Asmita
From United Kingdom, Newcastle upon tyne
Acknowledge(0)
Amend(0)
From United Kingdom, Newcastle upon tyne
Acknowledge(0)Amend(0)
Leave encashment is non-taxable at the time of leaving service only. If its paid in middle of employment, it will be taxable. Regards, Supriya
Acknowledge(0)Amend(0)
Acknowledge(0)Amend(0)
Dear Supriya,
Leave encashment is not taxable at the time of leaving service; it is a matter of dispute. Generally, the Income Tax Department ensures that leave encashment is exempt only if it is received at the time of retirement. Section 10(10AA) of the IT Act states that leave encashment is not taxable "on retirement or otherwise." The catchword here is 'otherwise,' which suggests that there are certain exemptions in the case of a person leaving their job for reasons other than retirement. There are judgments of High Courts which confirm that leave encashment is not taxable at the time of resignation as well.
In most private organizations, tax is deducted on leave encashment at the time of resignation. Employees have the option to file a tax return and claim the refund.
Regards, Kamal
From India, Pune
Acknowledge(0)Amend(0)
177Leave encashment is not taxable at the time of leaving service; it is a matter of dispute. Generally, the Income Tax Department ensures that leave encashment is exempt only if it is received at the time of retirement. Section 10(10AA) of the IT Act states that leave encashment is not taxable "on retirement or otherwise." The catchword here is 'otherwise,' which suggests that there are certain exemptions in the case of a person leaving their job for reasons other than retirement. There are judgments of High Courts which confirm that leave encashment is not taxable at the time of resignation as well.
In most private organizations, tax is deducted on leave encashment at the time of resignation. Employees have the option to file a tax return and claim the refund.
Regards, Kamal
From India, Pune
Acknowledge(0)Amend(0)
Dear Asmita Ji,
Leave encashment during the service period is taxable. It is not taxable when one gets it at the time of superannuation/retirement/termination of service. If you leave one job and take up another and get leave encashment from former employment, it is not taxable income.
From India, Pune
Acknowledge(0)Amend(0)
Leave encashment during the service period is taxable. It is not taxable when one gets it at the time of superannuation/retirement/termination of service. If you leave one job and take up another and get leave encashment from former employment, it is not taxable income.
From India, Pune
Acknowledge(0)Amend(0)
Hi all, Thank you all for your prompt response to the post. In my company, accounts department says leave encashment is taxable at the time of resignation. Regards
From United Kingdom, Newcastle upon tyne
Acknowledge(0)Amend(0)
From United Kingdom, Newcastle upon tyne
Acknowledge(0)Amend(0)Looking for something specific? - Join & Be Part Of Our Community and get connected with the right people who can help. Our AI-powered platform provides real-time fact-checking, peer-reviewed insights, and a vast historical knowledge base to support your search.
PF Contribution on Leave Encashment - Clarification by EPFO.pdf
SC -PF judgment on No PF on Leave encashment.doc
EPFO Circular Leave Encashment.jpg