In response to your query about leave encashment and its tax exemption status under the new tax regime in India:
As per the new tax regime introduced in the Union Budget 2020, individuals have the option to choose between the old (existing) and the new tax regimes. It's important to note that the new tax regime offers lower tax rates but removes various exemptions and deductions available under the old regime.
Under the old tax regime, leave encashment received at the time of retirement or leaving a job is exempted from tax for government employees under section 10(10AA)(i). For non-government employees, the exemption is the least of the following amounts under section 10(10AA)(ii):
1. Actual leave encashment received
2. 10 months average salary
3. Leave salary for the period of earned leave at the credit of the employee
4. Rs. 3,00,000
However, in the new tax regime, all these exemptions, including that for leave encashment, have been removed. So, if you opt for the new tax regime, the leave encashment at the time of Full and Final settlement will be taxable.
Here's a step-by-step guide of what you can do:
1. Evaluate: Analyze your income components, exemptions, and deductions.
2. Calculate: Compute your tax liability under both the tax regimes.
3. Decide: Choose the tax regime that is more beneficial to you.
Remember, the choice of tax regime is individual and may vary based on the specific details of your income and deductions. Therefore, it might be helpful to consult with a tax advisor or use an online tax calculator to make an informed decision.
Please note: This information is applicable for the FY 2020-21 and may change in subsequent years as per the Income Tax Act of India.