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Tax on leave encashment on retirement

596 views 1 replies

Pradeep Mehra

2 Points Posted on 18 January 2026

Respected Sir,
I, Pradeep Kumar Mehra, retired under VRS from State Bank of India on 22/01/2019.
Now let me know the non taxable limit of Rs.3 lacs on leave encashment payment has been increased up to 25 lacs for non government employees (Bank employees) retired after 2016
Please let me know the latest information regarding this query
Thanking you,
yours faithfully,
Pradeep Kumar Mehra
Emil - pradeep.mehra1961 @ gmail.com
Mob- 9917474548

Replies (1)

Aashok Kumar Sharma

Finance/Compliance Consultant

61641 Points Posted on 19 January 2026

For a non-government employee (such as an SBI retiree), the maximum tax-free exemption on leave encashment on retirement is ₹25,00,000 under Section 10(10AA)(ii). The actual exemption is the least of (i) leave encashment received, (ii) ₹25 lakh, (iii) average salary for 10 months, and (iv) cash value of unutilised leave. This replaces the old ₹3 lakh limit effective from 1 April 2023 and can often be applied to earlier years with proper procedural steps.