TAX IMPLICATION ON LEAVE ENCASHMENT AMOUNT ON NORMAL RETIREMENT FOR A PSU BANK EMPLOYEE I have retired normally from a PSU Bank. I have been given exemption of Rs 3 lakh from the leave encashment amount (eight months equivalent salary) on retirement and rest amount has been taxed by bank. As the Government employees are fully exempted, being a PSU bank employee, am I not eligible for the same benefit?
Ans: The PSUs and nationalised banks are not treated as central and state government employees. Hence for leave encashment, they cannot take the benefit of unlimited exemption.
For a PSU employee (including a PSU Bank), the maximum exemption allowed on leave encashment is Rs 3 lakh in your case.