Leave Encashment

Income Tax Income from Salary
1

Hi @TeamQuicko

I worked for a company from June 2022 to July 2023 and received leave encashment upon resigning. Can I get an exemption for the leave encashment amount (~3 lakhs)? If so, how do I claim it?

In Form 16, the employer has calculated the tax by combining the leave encashment with the original salary.

2

Hi @Yash_123

The same can be claimed while filing the ITR. There is a specific option available in the ITR for claiming the same. You can also connect with me on Instagram @FinTaxSnippets for further details in this regard.

Thanks

3

@TeamQuicko we have to consider minimum of:

  • actual leave amount
  • 3 Lakhs
  • Last 10 month’s average salary (Basic + DA + Turnover Commission)

I have basic salary, special allowance, and HRA in my salary. Should the calculation include basic + special allowance or basic + special allowance + HRA?

Is it allowed to claim the deduction while resigning from the company, as the some blogs/videos/documents mention it is applicable only upon retirement?

4

Hi @Yash_123

The exemption can be availed multiple times during working, however, the overall exemption for a PAN cannot exceed the amount specified in the respective section. For calculation purposes, you can only take Basic Salary into consideration. Hope this clarifies. For any further concerns, pls connect with me on Instagram @FinTaxSnippets.

Thanks

5

Hi @Yash_123,

As the leave encashment is received on resignation, the least of the following will be exempt:

  1. Amount received as leave encashment
  2. The maximum amount stated by the government, i.e., 25,00,000
  3. last 10 months of basic salary and DA

Salary here just includes your basic salary + DA