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 ]