​Is leave encashment taxable as salary?​​

By | December 4, 2017
(Last Updated On: December 4, 2017)

Is leave encashment taxable as salary?​​

It is taxable if received while in service.

As per Section 17(1) of Income Tax Act  :

(1) “salary” includes—

—-

(va) any payment received by an employee in respect of any period of leave not availed of by him;

Leave encashment received at the time of retirement is exempt in the hands of the Government employee.

In the hands of non-Government employee leave encashment will be exempt subject to the limit prescribed in this behalf under the Income-tax Law.​

[Specified Maximum exemption limit applicable in relation to employees who retire, whether on superannuation or otherwise, after 1-4-1998 : Rs. 3,00,000 – Notification No. SO 588(E), dated 31-5-2002]

[ Section 10(10AA ) of Income tax Act ]

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