As per section 10(10AA), leave encashment by a non-Government employee at the time of his retirement (whether on superannuation or otherwise) is exempt. The exemption will be lower of the following amount : 1. Period of earned leave standing to the credit in the employee’s account at the time of retirement × Average monthly salary (see note 1 and note 2). 2. Average monthly salary (as computed in Note 2) × 10 (i.e., 10 month’s average salary). 3. Maximum amount as specified by the Government, i.e., Rs. 3,00,000. 4. Leave encashment actually received at the time of retirement
Note1: is in attached image.
Note 2: Average monthly salary for this purpose means average salary drawn in the past ten months immediately preceding the retirement (i.e., preceding the day of retirement). Salary for this purpose will include only following:
ã Basic salary.
ã Dearness allowance, if considered for computing all the retirement benefits.
ã Commission based on fixed percentage of turnover achieved by the employee. Apart from the above items, salary for this purpose does not include any other allowances or perquisites.
From India, Mumbai
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1Note1: is in attached image.
Note 2: Average monthly salary for this purpose means average salary drawn in the past ten months immediately preceding the retirement (i.e., preceding the day of retirement). Salary for this purpose will include only following:
ã Basic salary.
ã Dearness allowance, if considered for computing all the retirement benefits.
ã Commission based on fixed percentage of turnover achieved by the employee. Apart from the above items, salary for this purpose does not include any other allowances or perquisites.
From India, Mumbai
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Dear Prasad,
Generally, the leave encashment is given on Basic + DA or on total wages in case of minimum wages. Whereas the salary for the duty period is based on Basic + all allowances. The differentiation may be due to the fact that the person availing encashment of leave does not incur expenditure on account of various factors such as house rent. Anyway, this is the rule applicable in Government and PSUs.
Secondly, the numbers of leave permitted to be accumulated and encashed are based on the policies of the company or the agreement between management and labor/labor union. Even the components of salary for encashment of leave can be part of such an agreement. Certain companies have a policy of closing the leave account every year, either financial or calendar, by availing or encashing to avoid higher financial liability arising out of promotion, increment, etc. in the future.
Thirdly, if the leave is encashed, the component of salary shall be of the month of encashment and not on the historical components. However, the calculation shall be total wages divided by the number of days of the month multiplied by the number of days of leave encashed.
Regards
From India, Mumbai
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Generally, the leave encashment is given on Basic + DA or on total wages in case of minimum wages. Whereas the salary for the duty period is based on Basic + all allowances. The differentiation may be due to the fact that the person availing encashment of leave does not incur expenditure on account of various factors such as house rent. Anyway, this is the rule applicable in Government and PSUs.
Secondly, the numbers of leave permitted to be accumulated and encashed are based on the policies of the company or the agreement between management and labor/labor union. Even the components of salary for encashment of leave can be part of such an agreement. Certain companies have a policy of closing the leave account every year, either financial or calendar, by availing or encashing to avoid higher financial liability arising out of promotion, increment, etc. in the future.
Thirdly, if the leave is encashed, the component of salary shall be of the month of encashment and not on the historical components. However, the calculation shall be total wages divided by the number of days of the month multiplied by the number of days of leave encashed.
Regards
From India, Mumbai
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Dear Seniors,
I have worked in the service industry for 2 years. I left my job with a 1-month notice period. I have a balance of 30 days of EL. As per company policy, the employer needs to provide EL encashment upon leaving the present company. However, the employer is not willing to provide the encashment to me.
What can I do? Please suggest.
Thank you.
From India, Hyderabad
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I have worked in the service industry for 2 years. I left my job with a 1-month notice period. I have a balance of 30 days of EL. As per company policy, the employer needs to provide EL encashment upon leaving the present company. However, the employer is not willing to provide the encashment to me.
What can I do? Please suggest.
Thank you.
From India, Hyderabad
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Encashment of leave is considered as part of wages and complain to the labour commissioner for non-payment. Seniors may also comment.
From India, Mumbai
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From India, Mumbai
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Hi, Encashment of Earned leave is always done based upon the current years basic salary and not on last year. So its just simple as having TEA everyday :-) regards, Chetan Kumar.
From India, Kolkata
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From India, Kolkata
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For example, if the monthly basic salary is Rs. 15,000, then calculate it on a per-day basis, which would be Rs. 500 daily (15000/30). Now, if the earned leave encashment balance is 50 days, then multiply 50 by 500, which will amount to Rs. 25,000.
From India, Kolkata
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From India, Kolkata
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Dear Leave Encasement always calculated on Basic Pay on current salary ( Basic ) when you are encashed.
From India, Delhi
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From India, Delhi
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Dear All,
After going through the responses, I offer my views regarding leave encashment. In my opinion, the formula you adopt for Leave Without Pay (LOP) should be followed for leave encashment. In other words, if you consider Basic + DA (if applicable) for LOP, then it should be followed. Alternatively, if the Gross wages are considered, then that should be followed.
In any case, the encashment should only be based on current wages. This is because, assuming for some reason, if the employee avails leave now and chooses to exhaust the Earned Leave (EL) standing to his credit, he will be paid salary based on the current salary only.
Regards,
M.V. Kannan
From India, Madras
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After going through the responses, I offer my views regarding leave encashment. In my opinion, the formula you adopt for Leave Without Pay (LOP) should be followed for leave encashment. In other words, if you consider Basic + DA (if applicable) for LOP, then it should be followed. Alternatively, if the Gross wages are considered, then that should be followed.
In any case, the encashment should only be based on current wages. This is because, assuming for some reason, if the employee avails leave now and chooses to exhaust the Earned Leave (EL) standing to his credit, he will be paid salary based on the current salary only.
Regards,
M.V. Kannan
From India, Madras
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Dear all encashment leave amount must calculate on basic+da only not gross salary basic+da/26*no of days
From India, Mumbai
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From India, Mumbai
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