Leave Encashment: What Is It?
Receiving a sum of money in return for an employee’s unused paid time off over a given year is known as leave encashment. When they retire or quit their jobs, workers might get money back from their unused vacation or leave time.
Employers frequently permit workers to carry over unused paid time off from one year to the next. In order to provide a financial buffer for the future, employees may also opt to be paid for any unused vacation time rather than taking time off for holidays.
Although there are ways to be exempt, the money received for these unused vacation days and leaves is taxable. Government workers are not subject to taxes when they cash their leaves after retirement.
Certain restrictions may exempt non-government employees from paying taxes when they cash their leaves. The sections that follow will provide further information about them.
