How to make leave encashment taxable?

As per statutory norms, employees are entitled to a minimum of 12 paid leaves annually if they’ve worked 240 days or more in a year.
When employees don’t use their assigned leaves, companies may either carry them forward or encash them.
The payment received for unused leaves is called Leave Encashment, and it can be made taxable based on your company’s policy.

Steps to Make Leave Encashment Taxable

1. Go to Org → Exits.

2. Click on the Exit Process tab.

3. Navigate to Exits in Progress.

4. Under the Actions column, click Manage.

   

5. In the side window, go to the Finances section.

6. Click Review & Finalise.

   

7. On Page 1 – Payable Components, select the Leave section.

8. Under Leave Encashments, check the box Exclude from exemptions.

9. Click Save & Next to apply the change.