Many organization provide the facility of encashment of leave. Leaves can be bifurcated by the company as Casual Leave, Privilege Leave, Sick Leave, All purpose Leave.
Leave can be enchased during employment at the time of leaving the service of the company. This may mean resignation, retirement.
Leave encashment received by the family members after the death of an employee is not chargeable to tax to the respective nominee.
Organizations can have their own policy for leave encashment. They can encash basis gross salary or via basic salary.
Below is the tax treatment for leave encashment.
Note : If employee has already availed the exemption under this section in any previous years due to the retirement of previous employer and now again he is retiring from present employer then the max limit of Rs 300000/- would get reduced from the amount which he has already got exemption.