Income Tax Rules: Important news for government and private employees, know the income rules on leave encashment
Income Tax Rules: The government considers the amount received on encashment of leaves as your income. The government has made special rules to levy tax on this, which is necessary to keep in mind. In such a situation, let us understand leave encashment properly in the news below-
HR Mandi Bhav - Whether the job is government or private, employees get different types of leaves, such as casual leave (CL), medical leave, earned leave, and maternity leave. Some of these leaves expire if not taken within the stipulated time, while some are added in the new financial year.
Employees can cash these leaves on retirement or leaving the job. Therefore, most of the employees try to save these leaves so that they can get maximum benefit.
The government considers the amount you get on encashment of leaves as a part of your income, therefore, the government has made some tax rules on leave encashment. These rules are different for government and private jobs. If you are also employed, then you must be aware of these rules.
These are the income tax rules on leave encashment-
On encashing leave during employment-
The amount of leave encashment during the job is considered as part of the salary and is taxable. When you make encashment, the amount received is added to your total income, on the basis of which your income tax is determined. However, you can take relief under section 89 of Income Tax.
There are some conditions for this, such as you should have worked with the same employer for at least 5 years before that year. Also, the amount of encashment should not exceed the salary of the month in which you receive it. By following these rules you can get tax relief.
On getting encashment done after retirement or leaving the job-
If you encash your leave after retirement or leaving the job, then its rules are different for government employees and private employees. Know here-
In case of government job-
If you are a central or state government employee and get leave encashment done at the time of retirement or resignation, then no tax will be levied on that amount, no matter what the amount is. When an employee dies during the job, the leave encashment money received by his legal heir is not taxable.
In case of private job-
If you are a private sector employee and encash your leave on retirement or leaving the job, then there will be no tax on an amount up to Rs 25 lakh. Earlier this limit was Rs 3 lakh. Tax is applicable on the amount above Rs 25 lakh as per your regular income tax slab.