During service leave encashment payments are taxable.
At time of retirement exemption as below:
a) Cash equivalent of unutilized earned leave (earned leave entitlement can not exceed 30 days for every year of actual service)
b) 10 months average salary
c) Leave encashment actually received. This is further subject to a limit of Rs 3,00,000 for retirements after 02.04.1998.
This is for private sector employees.
Rules are different for State and Central Govt employees.
10th August 2018 From India, Pune