How to make leave encashment taxable

Organizations are required to provide a minimum of 12 paid leaves annually if an employee has worked for 240 days or more in a year. However, sometimes an employee may not utilize all their assigned leaves in a given year. Depending on the company's policy, such leaves may either get carried forward or encashed. When an employee receives money in exchange for such unavailed leave, it is referred to as leave encashment.

In order to make this leave encashment taxable, log in to your Keka portal and click on Org (1). In Exits (2), find In Exit Process (3). You can use the search bar to find the employee's name. 

    Under Actions, find the 3 dots against the name and click on it. From the options that pop up, click on Process & Settle (4).

On the window that opens next, continue to step 3 (PAYABLES). Scroll down to find the Leave Encashment section and check the box against the dialogue 'Exclude from exemption'. Checking that box will make the leave encashment of the employee taxable. 

Now click Save & Continue to proceed to the next step and make any necessary changes there.

Now you know how to make the leave encashment of an employee taxable. If you have any more questions, please check out the other articles. Alternatively, you can talk to our product experts as well.