Re: Whether Leave Encashment Attracts PF? - CiteHR
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Yes it attracts PF on the leave encashment. Recently PF Deptt has issued a circular on 9th Sept,05 if you want the see the copy of circular pl go through LLR Nov,05 page no 289.
Regds,
Vikram Singh
09810102421

Hello all,
Nandu Here. I am in an leading Software Industry. Here we an policy wherein employee can opt for leave encashment only at his resignation OR Retirement.
To my knowledge recently a day before a new policy have been disclosed in the PF Section, but it was regarding the reducing the Interest Rate.
Please update me OR correct me that the Leave Encashment doesnot attract EPF when it is done at the time of Resignation/Retirement.
Waiting for your response of my last para.
Thanks
nand joshi

Hello All,

It is a very clear concept. I will try to make you understand to a certain limit.

Case 1: If leave encashment done at the time of resignation, then it will not reflect/attract to the EPF. It is a separate body. Still EPF will be calculated on the basis of Basic Salary etc...

Case 2: Now some companies have policy that you can have leave balance upto certain limit. For example: You can have leave balance upto 180 days. And by chance your leave balance goes upto 200 Then in this case your 20 days of leave will be treated as an excess and you will be asked to Opt any one of the below mentioned Options:

Option 1: Either you avail all the leave

Option 2: Your 20 days of leave will be transferred on your salary account. Now this will attract to your EPF since this will be treated as an part of your salary amount.

So it will be advisable to avail that leave and also you can claim LTA for the visit of 20 days from your organisation, Else you can ask your organisation to creadit the certain amount of leave balance to your salary account.

Hope this make clear upto certain end. Let me know if you want anything more.

Nand Joshi

Hi Vikram,
Please tell us as what is LLR Nov'5 as mentioned by you.
Also i take the opportunity to thank all the members of this discussion group for enlightening us and special credit to Anil Anand..
Regards,
Rajat

we are deducting p.f. contribution of leave encashment and depositing the employee's contribution as well as employer's contribution. but conception is not clear to us that whether the leave encashment will attract the p.f. contribution at the time full & final settlement in form of final payment on separation from services.
Regards
nirmal

dear sir
we are deducting p.f. contribution of leave encashment and depositing the employee's contribution as well as employer's contribution. but conception is not clear to us that whether the leave encashment will attract the p.f. contribution at the time full & final settlement in form of final payment on separation from services.please let me know.
thanks & Regards
nirmal

As per 2(b) of EPF Act,1952 “Basic Wages” means all emoluments which are earned by an employee while on duty or (on leave or on holidays with wages in either in case) in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include

(i) the cash value of any food concession

(ii) any dearness allowance, HRA, Overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;

(iii) any presents made by the employer

Every employee is entitled to encash leave as per the rules. In view of the definition of “basic wages”, if an employee who has earned leave goes on leave, his salary or wages can obviously fall within the term “basic wages”. There is , therefore , no good reason to hold that the even of his not availing the leave but encashing it, the amount which he gets in such encashment should be excluded from the basic wages within the definition of “basic wages” as given in section 2(b) of the Act. Recently in West Bengal RPFC has issued a circular on this.

Hi Anuradha, The document is fine and quite helpful. But i just want to know on what basis the PF contribution will get effect. The govt has not given any clarification regarding this. Thanks
Hi to All,
I m closely observing this topic & the more i read this the more i have queries. To put the things forward, let me ask the question directly :
a) Leave Encahment can be in 3 scenarios i.e. i) Upon Leaving, ii) Upon Retirement, iii) Excess encashment as per Co. policy....... now will PF gets attracted in all the three cases?
b) If PF is deducted (assuming in all or either of above mentioned case), then will the Co. will also match the same contribution. If yes, then will it be bifurcated into 8.33% & 3.67%(like we do in normal PF case).
c) What is the tax treatment for all the three scenarios mentioned in point a). If tax is deducted(assuming in all or either of above mentioned case)will the taxable part be post PF or pre PF for e.g. PF encashment value is Rs. 300, pf value is say 36, will the taxable part will be 300 or 300-36.
Kindly reply .....
Thanks
Vineet


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