Leave encashment received by an employee is charged under
Athe head Capital gains
Bthe head Other sources
Cthe head Salaries
Dno head, being exempt
Answer & Solution
Correct answer: C. the head Salaries
1. Leave encashment is paid by the employer for unused leave.
2. It arises from the employer employee relationship.
3. It is therefore charged under the head Salaries.
4. It sits in the computation next to gratuity and pension as a retirement benefit.
5. Whether part of it is exempt is a separate question from which head applies.
_Source: ICAI Income Tax Law, Ch3 'Heads of Income', Unit 1 'Salaries', section 1.3_
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