Leave Encashment 

Purpose

This component computes exemptions on the Leave Encashment received by an employee at the time of separation from employment.

The system computes exemption on Leave Encashment as the minimum of:

       1.      Leave Encashment Amount

       2.      Exemption limit

       3.      Product of the Average Monthly Salary and the Multiplication factor

       4.      Product of Average Monthly Salary and Number of months of leave encashed

For more information, see Exemptions on Leave Encashment

Integration

·        Termination Workbench – This functionality computes the Leave Encashment amount for the employee.

·        Income Tax – The exemption on Leave Encashment is reported by the Income Tax functionality under Section 10 Exemptions.

·        Previous Employment Tax Details Infotype (0580) – If an employee has claimed an exemption on Leave Encashment in a previous employment, you can capture the exemption amount in this infotype. The system will deduct this claimed amount from the maximum exemption limit, and then compute the current exemption.