Avoid encashing of leave while you are in service: Know the rules

Tax exemption on leave encashment is only available at retirement, resignation or termination

Union Budget 2023 has proposed to hike the tax exemption limit on leave encashment at the time of retirement for non-government, salaried employees from Rs 3 lakh to Rs 25 lakh.

Archit Gupta, founder and chief executive officer (CEO), Clear, says, “Normally, at the time of retirement or resignation, people get some money for not taking allotted leaves. That is leave encashment. Until March 31, 2023, up to Rs 3 lakh of this amount was tax exempt. From April 1, 2023 the limit will increase to Rs 25 lakh for private-sector employees.”

Leave encashment is fully tax-exempt in the case