EL Encashment on resignation

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Chahat Khanna (Querist)
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29 September 2025 If EL are encashed on resignation, will it be exempt or is it exempt only at the time of retirement?
It is also mentioned that total exemption would be 25 lakhs from all employers, if it is supposed to be exempted only on retirement what's the point of words "all employers"

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 The phrase "all employers" ensures that an individual cannot claim a fresh ₹25 lakh exemption each time they resign or retire from a new employer; any exemption already claimed in prior jobs must be subtracted from the ₹25 lakh lifetime cap.
Encashment of Earned Leave (EL) at the time of resignation is not fully exempt from tax; it is only partially exempt, and the rules for exemption are the same as those that apply at the time of retirement for non-government employees. The maximum limit of total exemption from all employers is ₹25 lakh in a lifetime, whether received on resignation or retirement.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 For non-government employees, leave encashment is partially exempt up to ₹25 lakh in total, regardless of whether it is received upon resignation, superannuation, or retirement. Tax will be payable on any amount that exceeds the exempted limits.

For government employees (Central/State), leave encashment received on retirement, resignation, or otherwise is fully exempt.

If an employee receives leave encashment from more than one employer over their career, the aggregate exemption cannot exceed ₹25 lakh across all employers.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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29 September 2025 Good luck..

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