Yes, it attracts PF on the leave encashment. Recently, the PF Department has issued a circular on 9th Sept '05. If you want to see a copy of the circular, please refer to LLR Nov '05, page number 289.
Regards, Vikram Singh 09810102421 vikramlamhe@gmail.com
From India, Delhi
Acknowledge(0)
Amend(0)
108Regards, Vikram Singh 09810102421 vikramlamhe@gmail.com
From India, Delhi
Acknowledge(0)Amend(0)
Hello all,
Nandu here. I am in a leading software industry. Here we have a policy wherein an employee can opt for leave encashment only at his resignation or retirement.
To my knowledge, recently a day before, a new policy has been disclosed in the PF section, but it was regarding reducing the interest rate.
Please update me or correct me that the leave encashment does not attract EPF when it is done at the time of resignation or retirement.
Waiting for your response on my last para.
Thanks,
Nand Joshi
Acknowledge(0)Amend(0)
Nandu here. I am in a leading software industry. Here we have a policy wherein an employee can opt for leave encashment only at his resignation or retirement.
To my knowledge, recently a day before, a new policy has been disclosed in the PF section, but it was regarding reducing the interest rate.
Please update me or correct me that the leave encashment does not attract EPF when it is done at the time of resignation or retirement.
Waiting for your response on my last para.
Thanks,
Nand Joshi
Acknowledge(0)Amend(0)
Hello All,
It is a very clear concept. I will try to make you understand to a certain limit.
Case 1: If leave encashment is done at the time of resignation, then it will not reflect/attract to the EPF. It is a separate entity. Still, EPF will be calculated based on the Basic Salary, etc.
Case 2: Now, some companies have a policy that allows you to maintain a leave balance up to a certain limit. For example, you can have a leave balance of up to 180 days. If, by chance, your leave balance exceeds 200 days, then in this scenario, the excess 20 days of leave will be considered as such, and you will be asked to choose one of the following options:
Option 1: Avail all the leave.
Option 2: Transfer the 20 days of excess leave to your salary account. This will attract EPF deductions as it will be treated as part of your salary amount.
Therefore, it is advisable to utilize the leave and you can also claim LTA for the period of 20 days from your organization. Alternatively, you may request your organization to credit a certain amount of leave balance to your salary account.
I hope this clarifies up to a certain extent. Please let me know if you need any further information.
Nand Joshi
Acknowledge(0)Amend(0)
It is a very clear concept. I will try to make you understand to a certain limit.
Case 1: If leave encashment is done at the time of resignation, then it will not reflect/attract to the EPF. It is a separate entity. Still, EPF will be calculated based on the Basic Salary, etc.
Case 2: Now, some companies have a policy that allows you to maintain a leave balance up to a certain limit. For example, you can have a leave balance of up to 180 days. If, by chance, your leave balance exceeds 200 days, then in this scenario, the excess 20 days of leave will be considered as such, and you will be asked to choose one of the following options:
Option 1: Avail all the leave.
Option 2: Transfer the 20 days of excess leave to your salary account. This will attract EPF deductions as it will be treated as part of your salary amount.
Therefore, it is advisable to utilize the leave and you can also claim LTA for the period of 20 days from your organization. Alternatively, you may request your organization to credit a certain amount of leave balance to your salary account.
I hope this clarifies up to a certain extent. Please let me know if you need any further information.
Nand Joshi
Acknowledge(0)Amend(0)
Hi Vikram,
"Yes, it attracts PF on the leave encashment. Recently, the PF Department has issued a circular on 9th September 2005. If you want to see the copy of the circular, please go through LLR Nov '05, page number 289."
Please tell us what LLR Nov '05 refers to, as mentioned by you. I also take this opportunity to thank all the members of this discussion group for enlightening us, with special credit to Anil Anand.
Regards,
Rajat
From India, Pune
Acknowledge(0)Amend(0)
"Yes, it attracts PF on the leave encashment. Recently, the PF Department has issued a circular on 9th September 2005. If you want to see the copy of the circular, please go through LLR Nov '05, page number 289."
Please tell us what LLR Nov '05 refers to, as mentioned by you. I also take this opportunity to thank all the members of this discussion group for enlightening us, with special credit to Anil Anand.
Regards,
Rajat
From India, Pune
Acknowledge(0)Amend(0)
We are deducting PF contribution for leave encashment and depositing both the employee's and employer's contributions. However, we are unsure whether leave encashment will attract PF contributions at the time of full and final settlement, in the form of the final payment upon separation from services.
Regards,
Nirmal
Acknowledge(0)Amend(0)
Regards,
Nirmal
Acknowledge(0)Amend(0)
Dear Sir,
We are deducting PF contribution from leave encashment and depositing both the employee's and employer's contributions. However, it is unclear to us whether leave encashment will attract PF contributions at the time of full and final settlement in the form of final payment upon separation from services. Please clarify this for us.
Thanks and Regards,
Nirmal
Acknowledge(0)Amend(0)
We are deducting PF contribution from leave encashment and depositing both the employee's and employer's contributions. However, it is unclear to us whether leave encashment will attract PF contributions at the time of full and final settlement in the form of final payment upon separation from services. Please clarify this for us.
Thanks and Regards,
Nirmal
Acknowledge(0)Amend(0)
As per 2(b) of EPF Act,1952 “Basic Wages” means all emoluments which are earned by an employee while on duty or (on leave or on holidays with wages in either in case) in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include
(i) the cash value of any food concession
(ii) any dearness allowance, HRA, Overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any presents made by the employer
Every employee is entitled to encash leave as per the rules. In view of the definition of “basic wages”, if an employee who has earned leave goes on leave, his salary or wages can obviously fall within the term “basic wages”. There is , therefore , no good reason to hold that the even of his not availing the leave but encashing it, the amount which he gets in such encashment should be excluded from the basic wages within the definition of “basic wages” as given in section 2(b) of the Act. Recently in West Bengal RPFC has issued a circular on this.
From India, Chennai
Acknowledge(0)Amend(0)
(i) the cash value of any food concession
(ii) any dearness allowance, HRA, Overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;
(iii) any presents made by the employer
Every employee is entitled to encash leave as per the rules. In view of the definition of “basic wages”, if an employee who has earned leave goes on leave, his salary or wages can obviously fall within the term “basic wages”. There is , therefore , no good reason to hold that the even of his not availing the leave but encashing it, the amount which he gets in such encashment should be excluded from the basic wages within the definition of “basic wages” as given in section 2(b) of the Act. Recently in West Bengal RPFC has issued a circular on this.
From India, Chennai
Acknowledge(0)Amend(0)
Hi Anuradha, The document is fine and quite helpful. But i just want to know on what basis the PF contribution will get effect. The govt has not given any clarification regarding this. Thanks
Acknowledge(0)Amend(0)
Acknowledge(0)Amend(0)
Hi to All,
I am closely observing this topic and the more I read this, the more queries I have. To put the things forward, let me ask the question directly:
a) Leave Encashment can be in 3 scenarios i.e. i) Upon Leaving, ii) Upon Retirement, iii) Excess encashment as per Co. policy... now will PF get attracted in all three cases?
b) If PF is deducted (assuming in all or either of the above-mentioned cases), will the Company also match the same contribution? If yes, will it be bifurcated into 8.33% & 3.67% (like we do in a normal PF case)?
c) What is the tax treatment for all three scenarios mentioned in point a)? If tax is deducted (assuming in all or either of the above-mentioned cases), will the taxable part be post PF or pre PF? For example, if PF encashment value is Rs. 300, and PF value is say 36, will the taxable part be 300 or 300-36?
Kindly reply.....
Thanks,
Vineet
Acknowledge(0)Amend(0)
I am closely observing this topic and the more I read this, the more queries I have. To put the things forward, let me ask the question directly:
a) Leave Encashment can be in 3 scenarios i.e. i) Upon Leaving, ii) Upon Retirement, iii) Excess encashment as per Co. policy... now will PF get attracted in all three cases?
b) If PF is deducted (assuming in all or either of the above-mentioned cases), will the Company also match the same contribution? If yes, will it be bifurcated into 8.33% & 3.67% (like we do in a normal PF case)?
c) What is the tax treatment for all three scenarios mentioned in point a)? If tax is deducted (assuming in all or either of the above-mentioned cases), will the taxable part be post PF or pre PF? For example, if PF encashment value is Rs. 300, and PF value is say 36, will the taxable part be 300 or 300-36?
Kindly reply.....
Thanks,
Vineet
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