Is My PL Encashment from 2007 and 2008 Taxable or Tax-Free? Seeking Advice

Hi Friends,

I have some doubts regarding the PL encashment. I have received the PL encashment for the calendar year 2007 & 2008 today. Will the amount be added to taxable salary, or is it exempt from income tax?

Waiting for your reply.

Thanks & Regards,
Ravi

Encashment other than at the time of retirement is fully taxable, while at the time of retirement only encashment up to 30 is eligible for exemption. For more information, please refer to [link removed].

Regards,
Atul D

Hi Ravi,

Leave encashment while in service is taxable. Encashment of sick leave is also taxable. Leave encashment received at the time of retirement is fully exempt in the case of Government Servants. For non-Government Employees, leave encashment is exempt to the extent of the least of the following four amounts:

- Rs. 3,00,000/-
- Ten months' average salary
- Cash equivalent of the leave due at the time of retirement
- Leave encashment actually received at the time of retirement

Here, the average salary means the average of the salary drawn during the last ten months before retirement.

However, a significant question arises in the case of private companies, where the attrition factor is involved – does resignation equate to retirement? In other words, is the amount received for the PL under the full and final settlement taxable? The answer is yes; this amount is taxable.

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