Leave encashment from MNC

Ishika 1
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Hi,

I was working with an US MNC in Bangalore. I resigned from the company in August 2011. During the full and final settlement I was given the Leave encashment for all the earned leaves(40) I had accrued till then. However, that leave encashment has been added as an income in my tax sheet, and is subjected to full tax as per Indian tax laws.

Is not the leave encashment tax-exempted in my case.

Thanks.

Regards, Ishika

taxable-income leave-encashment income-tax-return income-tax
1 Answers

At the time of leaving employer, leave encashment would be non-taxable.

The exemption is to be limited to minimum of all below:

  1. The actual amount received
  2. The cash equivalent of leave balance (max 30 days per year of service)
  3. Maximum of 10 months of leave encashment, based on last 10 months average salary
  4. Rs. 3 Lakhs
Pankaj Batra5212

Hi,

Thanks for your reply.

Is this true for every change of organsiation one does. I heard from someone that a person can claim exemption on the Leave encashment only upto a max. value of Rs.3lakhs in his/her complete professional life, irrespective of the number of job changes or value of leave encashment received on every job left. That is, if someone changes 5 jobs in his entire profesional life, and he receives and a leave encashment amount of Rs.1 lakh, on every change, he can only claim an exemption thrice (upto 3lakhs), and not beyond that.

Is this true?

Regards, Ishika

Ishika•

There is as such no limitation on whole life leave encashment. 3 lakh amount is maximum allowed per job leaving.

Pankaj Batra•
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