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Leave encahsment at the time of retirement is exempt for Public sector Units/ Nationalised Bank

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vikas

officer

26 Points Posted on 20 August 2020

Isleave encashment received at the time of retirement by an employee of SBIor nationalised bank is exempt?

Replies (3)

Quick Summary

Employees of Public Sector Units (PSUs) and Nationalised Banks are generally not eligible for full tax exemption on leave encashment received at retirement, unlike Central and State Government employees. For income tax purposes, PSUs and banks are not classified as government employers. Therefore, retired employees from these organisations are entitled to tax exemption on leave encashment only up to the limits and criteria applicable to non-government employees.

Sagar Patel

Tax and Business Consultant

11616 Points Posted on 20 August 2020

Leave encashment is fully exempt only for employees of Central and State Government (If received after retirement or superannuation). For the purpose of income tax, PSU/nationalized bank is not considered as government employer. Accordingly, retired employees of public sector undertakings and nationalised banks cannot be treated as government employees. They are not entitled to get full tax exemption on leave encashment after retirement or superannuation under section 10(10AA). Exemption available to them up to limit and as per criteria prescribed for non government employee.