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Leave encashment

Dibyendu Kumar Majumder (42 Points)

09 September 2020

I VRS FROM BANK 2019 MARCH.I GET LEAVE ENCASHMENT RS.800000 FROM BANK.LEAVE ENCASHMENT ARE FULLY EXEMTED OR NOT.

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 09 September 2020

(a) Government employees: Leave salary received at the time of retirement is fully exempt from tax.
(b) Non-government employees: Leave salary received at the time of retirement is exempt from tax to the extent of least of the following:
(i) ` 3,00,000
(ii) Leave salary actually received
(iii) 10 months’ salary (on the basis of average salary of last 10 months)
(iv) Cash equivalent of leave (based on last 10 months’ average salary immediately preceding the date of retirement) to the credit of the employee at the time of retirement or death. Earned leave entitlement cannot exceed 30 days for every year.

Notes:Leave salary received during the period of service is fully taxable.

Bank Employee is considered as "non government employee"", So, leave encashment is exempt up to limit as mentioned above.

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