As per section 10(10AA), leave encashment by a non-Government employee at the time of his retirement (whether on superannuation or otherwise) is exempt. The exemption will be lower of the following amount : 1. Period of earned leave standing to the credit in the employee’s account at the time of retirement × Average monthly salary (see note 1 and note 2). 2. Average monthly salary (as computed in Note 2) × 10 (i.e., 10 month’s average salary). 3. Maximum amount as specified by the Government, i.e., Rs. 3,00,000. 4. Leave encashment actually received at the time of retirement
Note1: is in attached image.
Note 2: Average monthly salary for this purpose means average salary drawn in the past ten months immediately preceding the retirement (i.e., preceding the day of retirement). Salary for this purpose will include only following:
ã Basic salary.
ã Dearness allowance, if considered for computing all the retirement benefits.
ã Commission based on fixed percentage of turnover achieved by the employee. Apart from the above items, salary for this purpose does not include any other allowances or perquisites.
From India, Mumbai
1Note1: is in attached image.
Note 2: Average monthly salary for this purpose means average salary drawn in the past ten months immediately preceding the retirement (i.e., preceding the day of retirement). Salary for this purpose will include only following:
ã Basic salary.
ã Dearness allowance, if considered for computing all the retirement benefits.
ã Commission based on fixed percentage of turnover achieved by the employee. Apart from the above items, salary for this purpose does not include any other allowances or perquisites.
From India, Mumbai
Dear Prasad,
Generally the leave encashment is given on Basic + DA or on total wages in case of minimum wages; Whereas the salary for duty period is based on Basic + all allowances. The differentiation may be due to the fact that the person availing encashment of leave does not incur expenditure on account of various factors such as house rent. Anyway, this is the rule applicable in Government and PSUs.
Secondly, the numbers of leave permitted to be accumulated and encashed are based on the policies of the company or the agreement between management and labour/labour union. Even the components of salary for encashment of leave can be part of such agreement. Certain companies have policy of closing the leave account every year, either financial or calendar, by availing or encashing to avoid higher financial liability arising out of promotion, increment, etc. in future.
Thirdly, if the leave is encashed, the component of salary shall be of the month of encashment and not on the historical components. However, the calculation shall be total wages divided by number of days of the month multiplied by the number of days of leave encashed.
Regards
From India, Mumbai
Generally the leave encashment is given on Basic + DA or on total wages in case of minimum wages; Whereas the salary for duty period is based on Basic + all allowances. The differentiation may be due to the fact that the person availing encashment of leave does not incur expenditure on account of various factors such as house rent. Anyway, this is the rule applicable in Government and PSUs.
Secondly, the numbers of leave permitted to be accumulated and encashed are based on the policies of the company or the agreement between management and labour/labour union. Even the components of salary for encashment of leave can be part of such agreement. Certain companies have policy of closing the leave account every year, either financial or calendar, by availing or encashing to avoid higher financial liability arising out of promotion, increment, etc. in future.
Thirdly, if the leave is encashed, the component of salary shall be of the month of encashment and not on the historical components. However, the calculation shall be total wages divided by number of days of the month multiplied by the number of days of leave encashed.
Regards
From India, Mumbai
Dear Seniors
I have worked in service industry for 2 years.I left job with 1 month notice period. I have 30 days EL'S balance. As per company policy the employer need to give EL encasement while leaving from present company. But employer is not willing to give encasement to me.
Then what can do. please suggest me.
From India, Hyderabad
I have worked in service industry for 2 years.I left job with 1 month notice period. I have 30 days EL'S balance. As per company policy the employer need to give EL encasement while leaving from present company. But employer is not willing to give encasement to me.
Then what can do. please suggest me.
From India, Hyderabad
Encashment of leave is considered as part of wages and complain to the labour commissioner for non-payment. Seniors may also comment.
From India, Mumbai
From India, Mumbai
Hi, Encashment of Earned leave is always done based upon the current years basic salary and not on last year. So its just simple as having TEA everyday :-) regards, Chetan Kumar.
From India, Kolkata
From India, Kolkata
For Example - monthly basic is 15000 p.m then take it on per day basis, which will come up to Rs.500 daily (15000/30)....now if earned leave encashment balance is 50, then multiply 50 by 500....which will be Rs.25000/-
From India, Kolkata
From India, Kolkata
Dear Leave Encasement always calculated on Basic Pay on current salary ( Basic ) when you are encashed.
From India, Delhi
From India, Delhi
Dear All,
After going through the responses, I offer my views regarding leave encashment. In my opinion the formula you adopt for Leave without pay (LOP) should be followed for leave encashment. In other words if you consider Basic + DA (if applicable) for LOP then it should be followed or if the Gross wages is considered then it should be followed.
In any case the encashment should only be on current wages. This is because assuming for some reason if the employee avails leave now and opts to exhaust the EL standing to his credit, he will be paid salary on the basis of current salary only.
Regards
M.V.Kannan
From India, Madras
After going through the responses, I offer my views regarding leave encashment. In my opinion the formula you adopt for Leave without pay (LOP) should be followed for leave encashment. In other words if you consider Basic + DA (if applicable) for LOP then it should be followed or if the Gross wages is considered then it should be followed.
In any case the encashment should only be on current wages. This is because assuming for some reason if the employee avails leave now and opts to exhaust the EL standing to his credit, he will be paid salary on the basis of current salary only.
Regards
M.V.Kannan
From India, Madras
Dear all encashment leave amount must calculate on basic+da only not gross salary basic+da/26*no of days
From India, Mumbai
From India, Mumbai
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