Leave encashment on retirement

India's Finance Minister, Nirmala Sitharaman, today presented the Union Budget 2023, which focuses primarily on developing a technology and innovation driven, self-sufficient economy that will move India closer to Amrit Kaal. During her budget speech, Mrs. Sitharaman proposed to hike the tax exemption on leave encashment on retirement of non-government salaried employees to Rs 25 lakh from Rs 3 lakh. "The limit of Rs 3 lakh for tax exemption on leave encashment is raised to Rs 25 lakh," she said. Leave encashment is the amount of money received in exchange for a period of unused leave not taken by an employee. The government implemented this significant tax exemption to assist the middle class, which is already feeling the effects of inflation. Also Read | Union Budget 2023: Here Are "Saptarshi" - The 7 Priorities Of Union Budget Meanwhile, Finance Minister Nirmala Sitharaman announced a big ticket budget ahead of next year's general elections that focused on the infrastructure and agribusiness sectors and raised the income tax rebate from Rs 5 lakh to Rs 7 lakh a year. Also Read | Budget 2023: Huge Income Tax Relief, Infra And Jobs Push Ahead Of 2024: 10 Points The government has outlined seven priority areas in the last complete budget before next year's general elections. The areas, Union Finance Minister Nirmala Sitharaman said, are "inclusive development, reaching the last mile, infrastructure and investment, unleashing the potential, green growth, youth power, and th...

Leave encashment meaning In India, leave encashment refers to the process of converting accumulated and unused paid leave days into monetary compensation. When an employee does not utilize their entitled leave days, they have the option to encash or convert those unused leave days into cash, which is paid out by their employer. ‍ Read: ‍ Leave encashment is typically granted upon certain conditions, such as retirement, resignation, or the termination of employment. The payment for leave encashment is calculated based on the employee's salary and the number of accumulated and unutilized leave days. Leave encashment calculation ‍ The calculation of leave encashment for private employees in India can vary depending on the company's policies and practices. However, I can provide you with an example calculation based on a common approach used by some organizations. Let's consider the following scenario: ‍ Employee details: ‍ Basic Salary: ₹50,000 per month Total accumulated leave days: 30 days Company policy: Leave encashment is calculated at a daily wage rate based on basic salary. Step 1: Determine the daily wage rate Daily wage rate = (Basic Salary / Total working days in a month) Assuming there are 30 working days in a month: Daily wage rate = (₹50,000 / 30) = ₹1,666.67 Step 2: Calculate leave encashment amount Leave encashment amount = (Daily wage rate x Number of unutilized leave days) In this example, if the employee has 30 unutilized leave days: Leave encashment amount ...

The Indian government has notified a hike in the tax exemption limit for leave encashment benefits received by salaried employees at the time of retirement from ₹3 lakh to ₹25 lakh, as promised in the The changed tax treatment, which will be effective from April 1, 2023, could benefit 50% of Union Finance Minister Nirmala Sitharaman had noted Revenue Secretary Sanjay Malhotra had told The Hindu that this tax exemption hike would effectively translate into potential savings of ₹7 lakh in taxes that would have been payable before this amendment. “That is almost ₹20,000 of savings a year over a 33-year working life,” he had pointed out. Employees who switch to the new exemption-free income tax regime in the year of their retirement will also benefit from this change, Mr. Malhotra said. Comments Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.

₹25 lakh. Earlier, the tax exemption on leave encashment for non-government employees was ₹3 lakh. So far, the tax exemption on leave encashment for non-government employees was ₹3 lakh which was fixed in 2002, when the highest basic pay in the government was ₹30,000 per month. The Central Board of Direct Taxes (CBDT), in a statement, said the aggregate amount exempt from income tax under section 10(10AA)(ii) shall not exceed the limit of ₹25 lakh, where any such payments are received by a non-government employee from more than one employer. Also Read| The increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to ₹25 lakh with effect from April 1, 2023. "In pursuance to the proposal in the Budget speech, 2023,... the central government has notified the increased limit for tax exemption on leave encashment on retirement or otherwise of non-government salaried employees to ₹25 lakh w.e.f. 01.04.2023," the CBDT said. In 2023-24 Budget, finance minister Nirmala Sitharaman had increased the tax exemption on leave encashment on retirement of non-government salaried employees to ₹25 lakh, from ₹3 lakh. More from HT • Auto • HT Tech • HT Bangla • HT School • HT Brand Stories • Quiz • HT Friday Finance • Explore Hindustan Times • HT Newsletters • Weather Today • About Us • Contact Us • Privacy Policy • Terms of Use • Disclaimer • Print Ad Rates • Code of Ethics • Sitemap • RSS Feeds • Subscription - Terms of Use

Leave encashment received on retirement is exempt from tax. It is eligible only if it is received on retirement from employment, and not if encashed during the course of employment. Courts have held that such retirement need not necessarily be on retirement at superannuation, but would also cover cases of leaving an employment by resigning. For employees of the central or state governments, the entire leave encashment amount received is exempt, without limits or conditions. On the other hand, for all other employees, there are various conditions and limits that are applicable to be able to claim exemption. For non-government employees, one condition is that leave entitlement for computing such exemption cannot exceed 30 days for each year of service. Besides, such leave encashment cannot exceed 10 months, and the exemption has to be computed on the basis of the average salary drawn within the 10 months, immediately preceding retirement. Besides, there is an overall cap on the amount of exemption, which is notified from time to time by the government. Recently, a notification was issued, pursuant to the budget announcement by the finance minister, increasing the exemption cap on leave encashment from ₹3 lakh to ₹25 lakh, effective 1 April. At first glance, this seems a great benefit given to non-government employees. But, is it really so? The limit of ₹3 lakh was fixed way back in 2002, with effect from 1998. An important aspect is that the law provides that the limit...

Every salaried person is entitled to a certain number of leaves to their kitty. However, this would not necessarily mean that the employee has utilised all their leaves. Let us understand how leaves that get accumulated until retirement, when encased at the time of retirement, get treated from a taxation point of view. With the help of this information, individuals may be encouraged to plan their taxes in advance. Treatment of Leaves Allotted Generally, employees are allowed to take leave during the period of service. There are various possibilities that can arise when leaves get allotted to an employee. • The employee may avail such leave • The employee may not avail such leave but encash it in future during the term of employment • The employee may not avail such leave but encash it at the time of retirement, whether on superannuation or otherwise • The leaves may lapse, depending on the employer’s H.R. policies. Check Your Home Loan Eligibility In Less Than A Minute Calculate Now Tax Treatment of Unavailed Leaves Encashed The payment received on account of encashment of unavailed leave would form part of salary. Leave salary encased during the period of service is fully taxable. However, section (10)(10AA) of the Income Tax Act provides certain relaxations from tax to amounts received on account of unutilised leaves during retirement. The provisions of this clause are: Type of Employee Treatment of Unutilised Leaves Encashed on Retirement, whether on Superannuation or O...

Have you heard of the term ‘leave encashment’? The concept of leave encashment is quite common among the salaried class. Sounds like even your leaves can bring you some income. Read on to know more about the meaning and taxability of leave encashment received by employees. Budget 2023 update The leave encashment for non government employees is exempt up to a certain limit. This limit was Rs.3 lakh since 2002 and is now increased to Rs.25 lakh owing to the general increase in income from salary. What is leave encashment? Every salaried person, as per labour law, is entitled to a minimum number of paid leave every year. However, it is not necessary that an individual employee utilises all the leave he is entitled to in a year. In fact, most employers allow the employees an option of carrying forward such unutilised paid leaves. This would invariably leave the employee with an accumulated unutilised leave balance at the time of retirement or resignation from the company, as the case may be. This compels the employer to compensate the unutilised paid leave of the employees. This concept is better known as leave encashment. What are the types of leaves? The different types of leaves are mentioned in the leave policy of a company. The leave policies differ from company to company. Here are the types of leaves generally available for the employees: • Casual leave:Casual leaves are available for 7 to 10 days. Employees may avail of these leaves for personal reasons. Encashment of ...

Leave encashment received on retirement is exempt from tax. It is eligible only if it is received on retirement from employment, and not if encashed during the course of employment. Courts have held that such retirement need not necessarily be on retirement at superannuation, but would also cover cases of leaving an employment by resigning. For employees of the central or state governments, the entire leave encashment amount received is exempt, without limits or conditions. On the other hand, for all other employees, there are various conditions and limits that are applicable to be able to claim exemption. For non-government employees, one condition is that leave entitlement for computing such exemption cannot exceed 30 days for each year of service. Besides, such leave encashment cannot exceed 10 months, and the exemption has to be computed on the basis of the average salary drawn within the 10 months, immediately preceding retirement. Besides, there is an overall cap on the amount of exemption, which is notified from time to time by the government. Recently, a notification was issued, pursuant to the budget announcement by the finance minister, increasing the exemption cap on leave encashment from ₹3 lakh to ₹25 lakh, effective 1 April. At first glance, this seems a great benefit given to non-government employees. But, is it really so? The limit of ₹3 lakh was fixed way back in 2002, with effect from 1998. An important aspect is that the law provides that the limit...

Every salaried person is entitled to a certain number of leaves to their kitty. However, this would not necessarily mean that the employee has utilised all their leaves. Let us understand how leaves that get accumulated until retirement, when encased at the time of retirement, get treated from a taxation point of view. With the help of this information, individuals may be encouraged to plan their taxes in advance. Treatment of Leaves Allotted Generally, employees are allowed to take leave during the period of service. There are various possibilities that can arise when leaves get allotted to an employee. • The employee may avail such leave • The employee may not avail such leave but encash it in future during the term of employment • The employee may not avail such leave but encash it at the time of retirement, whether on superannuation or otherwise • The leaves may lapse, depending on the employer’s H.R. policies. Check Your Home Loan Eligibility In Less Than A Minute Calculate Now Tax Treatment of Unavailed Leaves Encashed The payment received on account of encashment of unavailed leave would form part of salary. Leave salary encased during the period of service is fully taxable. However, section (10)(10AA) of the Income Tax Act provides certain relaxations from tax to amounts received on account of unutilised leaves during retirement. The provisions of this clause are: Type of Employee Treatment of Unutilised Leaves Encashed on Retirement, whether on Superannuation or O...

The Indian government has notified a hike in the tax exemption limit for leave encashment benefits received by salaried employees at the time of retirement from ₹3 lakh to ₹25 lakh, as promised in the The changed tax treatment, which will be effective from April 1, 2023, could benefit 50% of Union Finance Minister Nirmala Sitharaman had noted Revenue Secretary Sanjay Malhotra had told The Hindu that this tax exemption hike would effectively translate into potential savings of ₹7 lakh in taxes that would have been payable before this amendment. “That is almost ₹20,000 of savings a year over a 33-year working life,” he had pointed out. Employees who switch to the new exemption-free income tax regime in the year of their retirement will also benefit from this change, Mr. Malhotra said. Comments Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.