Retirement
Leave Encashment
pronounced: [L-e-a-v-e- -E-n-c-a-s-h-m-e-n-t]
The monetary equivalent of unused earned leave that employees can encash, typically upon retirement or resignation.
It is taxable as salary income under Section 17 of the Income Tax Act.
Example
For FY 2024-25, an individual earning ₹15 lakh/year in the new tax regime pays ₹1.04 lakh tax (after standard deduction). This includes zero tax up to ₹7 lakh under Section 87A rebate. Old regime tax on the same income would be ₹1.56 lakh (without deductions).
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Last updated: 21 May 2026