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Income tax on Leave encashment: Non- Government

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Sanjeev

Tax Payer

117 Points Posted on 30 December 2020

Dear All,

This is a query regarding leave encashment taxation. .

I'm a private company employee. A year back, due to job loss, I got my leaves encashed as a part of final settlement. This was my second job.

I want to understand the tax treatment on leave encashment amount. Is it tax exempt upto 3 lacs for every job change, OR, is this 3 lacs limit the absolute sum of leave encashment money across all the job changes in a lifetime, which is exempt from tax in India ?

Also, how is severance pay taxed ? I got few months of pay as severance pay in addition to the pay in lieu of notice period. I was asked to resign and on the experience certificate, it is clearly written that I resigned on my own accord.

Please suggest.

Replies (2)

Quick Summary

This discussion addresses the tax treatment of leave encashment for private company employees in the UK, specifically questioning the £300,000 exemption limit and its application across job changes. It also seeks clarification on how severance pay and pay in lieu of notice are taxed, particularly when resignation is initiated by the employer but documented as voluntary.

Balamurali Unnithan MS

STUDENT

1120 Points Posted on 30 December 2020

Leave Encashment during service is fully taxable in all cases, relief u/s 89 if applicable may be claimed for the same.
employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.