Attendance & leave
Leave encashment
Leave encashment is the payment of unused earned leave as salary, either during service under policy or at exit as part of the final settlement.
It is computed on basic (plus DA) divided by the month's days multiplied by days encashed. Policies decide whether in-service encashment is allowed and how many days.
At exit it is a statutory right for accumulated earned leave.
In Indian payroll
Tax-free up to ₹25 lakh at retirement or resignation for non-government employees; in-service encashment is fully taxable. Payroll must apply the right treatment in F&F.
What is Leave encashment?
Leave encashment is the payment of unused earned leave as salary, either during service under policy or at exit as part of the final settlement.
Why does Leave encashment matter in Indian payroll?
Tax-free up to ₹25 lakh at retirement or resignation for non-government employees; in-service encashment is fully taxable. Payroll must apply the right treatment in F&F.
Related terms
In Kuzhu
The Payroll module in Kuzhu is where Leave encashment is handled, on the same employee record as everything else.
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