Leave Encashment Scheme
Group Leave Encashment Plan is a non-linked non-participating group leave encashment product offering fund management. This plan offers interest income which gets credited to the policy at the end of financial year. The interest amount once credited to the policy account will become guaranteed. This Product offers Fund Management of employers’ liability and life cover to the employees.The Policy is offered you value by providing a platform of a large pooled fund providing smooth returns and safety through diversification backed by specialised in-house investment expertise..
HOW GROUP LEAVE ENCASHMENT PLAN WORKS?
• Actuarial valuation will be carried out at the time of inception and at regular periodic intervals to determine your liability towards leave encashment. You are expected to pay the contribution accordingly.
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Option for newly setup Gratuity Trust to pay for their past liabilities over a period of five years.
Key Benefits of Leave Encashment Scheme
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Flexibility in payment of contribution : You can pay annual contributions yearly, half-yearly or quarterly
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The plan has a uniform life cover of Rs. 5000 per member
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On Retirement/ Resignation/ Termination : The amount is paid out of the corpus maintained.
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On an unfortunate Death : Accrued Leave Encashment Benefit, as per scheme rules will be payable + Basic Sum Assured as opted for by the master policy.
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Contributions
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Interest Rate
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Tax Benefits
CONTRIBUTION
The contributions made under this plan shall be made in accordance with the funding requirements as per the scheme rules. The trustee or employer or policyholder shall be required to confirm that such funding is required as per extant accounting standard governing the measurement of long term employee benefits.
The plan does not allow any top-ups, unless required to address the underfunding of the scheme as per extant accounting standard governing the measurement of long term employee benefits.
TAX BENEFITS*
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The cash equivalent of the leave Encashment Benefit as and when paid by the employer is deductible from his income under section 43B (f) of the Income Tax Act.
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For the Employee the leave encashment benefit is taxable under section 15 of the Income Tax Act
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However the benefit received by the employee at the time of retirement, gets tax relief as per section 10(10AA) of Income Tax Act, subject to maximum of ten months leave.
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The amount of risk premium paid for Life Insurance cover will be treated as business expenses.
*Above tax benefits are as per Income Tax Act, 1961 and Income Tax Rules, 1962. Please consult to your Legal/ Tax expert for details
ELIGIBILITY
Member’s Age at Entry : 18 to 69 years
Minimum Contribution at Scheme Level : 5 Lakhs
Minimum-Maximum Sum Assured : 5,000/- (Per Member) Fixed
Member’s Maximum Age at Maturity : 70 years
Policy Term (PT) : One Year (Renewable)
Minimum Size of the Group : 10 Members
INTEREST RATES
An Interest rate will be declared by the company at the end of each financial year. The interest rate will be credited to the policy on a pro-rata basis based on the number of days the fund has been invested with the company. An interim rate shall be declared at the start of each financial year for exits during the financial year for which interest rate is not yet declared. The interest amount once credited to the policy account will be guaranteed.
The interest rate credited to each fund and expenses charged to such funds shall be in accordance with the Board approved policy of the companyolder
Leave encashment can be withheld if assesse faces
criminal cases or any departmental proceedings at the time of retirement.
Leave encashment is taxable whether it is received on retirement or resignation for private employees.
Leave encashment refers to the monetization of
unavailed leave which is carried forward.
The provision of leave encashment is that
maximum of INR 3 lakh is exempt from and for govt employee it is fully tax
free.
Leaves earned by the employees can be encashed in the next year, the quantum of leaves encashed is not more than 50% of earned leaves at credit or 30 days earned leave whichever is less.
It depends upon the policy of your company. If CL is paid to a certain days then it can be encashed.
Yes leave encashment is taxable for the bank employees subject to certain conditions
The number of leaves an employee can avail and
the leave encashment allowed are dependent on the employer. The amount received
as leave encashment is a perquisite to the employee and the tax implications
are dependent on whether the leaves are encashed during the course of
employment or at the time of retirement.
Leave encashment is taxable on resignation for a
non-government employee based on calculation as per section 10(10AA).For a
government employee, leave encashment received after retirement or resignation
is exempt from tax.
Leave encashment received by govt employees are tax free. Leave encashment received by private employees are minimum of the following: 1. Amount received as leave encashment. 2. Maximum amount stated by government i.e. 300000 3. Last 10 months of basic salary and DA 4. Salary per day unutilized leave (consider maximum 30 days leave per year) for every year of completed service
Leave encashment for non-government employee can be calculated as :
·Actual amount received.
·Average Salary of 10 months
·3,00,000 Whichever is lower is exempt.
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Benefits:
Flexibility in payment of contribution: you can pay annual contributions yearly, half-yearly or quarterly
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The plan has a uniform life cover of Rs. 5000 per member
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On Retirement/ Resignation/ Termination the amount is paid out of the corpus maintained.
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On an unfortunate Death Accrued Leave Encashment Benefit, as per scheme rules will be payable + Basic Sum Assured as opted for by the master policy.
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Contributions:
The contributions made under this plan shall be made in accordance with the funding requirements as per the scheme rules. The trustee or employer or policyholder shall be required to confirm that such funding is required as per extant accounting standard governing the measurement of long term employee benefits.
The plan does not allow any top-ups, unless required to address the underfunding of the scheme as per extant accounting standard governing the measurement of long term employee benefits.
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Interest Rate:
An Interest rate will be declared by the company at the end of each financial year. The interest rate will be credited to the policy on a pro-rata basis based on the number of days the fund has been invested with the company. An interim rate shall be declared at the start of each financial year for exits during the financial year for which interest rate is not yet declared. The interest amount once credited to the policy account will be guarantee. The interest rate credited to each fund and expenses charged to such funds shall be in accordance with the Board approved policy of the companyolder
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Claim Process :
The Insurer has to apply with the Insurance Company along with the following papers:-
1. Reason for exiting of the Employee in the claim form.
2. The resignation letter or Termination letter( if not bad conduct) of the employee.
3. Age Proof incase of retirement.
4. The canceled cheque for transfer of funds.
5. The calculation is provided to HR department for the approval which should match with the basis on the policy that was initiated.
6. The transfer of the amount after the approval is made in a 7-10 days.
Group Life Insurance
