Privilege / Earned Leave Encashment

 

Privilege / Earned Leave Encashment

How it is calculated?

·         15 Days of PL can be encashed once in a block of 2 Calendar years eg. 2019-2020.

·         Basic, DA and CCA is included in salary for calculation. i.e. (Basic, DA and CCA)/30 for 15 Days.

·         It comes around Rs. 43,000.00 approx. for an Employee having Basic Salary of Rs. 50000 @ 70% DA applicable now.

Whether it should be claimed or not?

·         Generally 1 PL is being credited for 11 working days.

·         Around 270 Working Days are there in a year. 24-25 PL’s are credited every year. That means around 50 PL’s are credited in a Block.

·         After encashment of 15 leaves, you have 30-35 PL’s left to carry forward which can be availed in addition to other leaves like casual leaves.

·         Hence it can be claimed without compromising on the leaves.

When is the right time to claim it?

·         If claimed in Start of block and the amount is invested in FD @ 6%, Rs, 43000 becomes Rs. 47600 approx.

·         If claimed in End of block and eligible amount due to annual increment and revision in DA increases to Rs. 49000 approx. (On Average basis). Hence Claim at end of Block is beneficial.

·         However, Employees who have reached to maximum of their basic salary in their cadres or are near, then Increase in Basic Salary is less than interest that can be earned if availed in start of block. Hence Claim at start of Block is beneficial.

·         Those in Early years of job should claim it in end of the block and those in top bracket of their fitment charts of basic salary should claim in start of the block.

·         If anyone want to use it to adjust it in his/her financial goal/planning or want to use it for any other independent activity like holidays, then no need to think much on this. You can claim as and when required.

Note: Leaves Encashed are subject to Income Tax. Even then it should be claimed.