THE BYSTANDER

You left a job this year — resignation, layoff, or retirement — and your final settlement included leave encashment and gratuity. Now you're staring at the ITR portal wondering: where do these even go? Are they taxable? What if your employer taxed the whole thing? This is the guide for exactly those ten minutes of confusion, for AY 2026-27. The two questions, answered upfront Are they taxable? Partly. Both leave encashment and gratuity have generous exemption limits — ₹25 lakh and ₹20 lakh respectively for most private-sector employees — so for the majority of people, most or all of the amount is exempt. Where do they go in the ITR? The exempt portion goes under exempt allowances in the salary schedule; only the portion above the limits stays in taxable salary. Now the details, because the limits have conditions. Leave encashment: the Section 10(10AA) rules Encashment of earned leave at the time of leaving a job qualifies for exemption. (Leave encashed while still employ...

For decades, waiting 45–60 days for your full and final settlement was just "how it works" in India. Not anymore. Under the new Labour Codes in force since November 21, 2025, your wage dues must be paid within two working days of your exit — and from mid-2026, that rule carries penalties for employers who ignore it. Most employees don't know this right exists, and plenty of companies are counting on that. Here's what you're owed, when, and the exact escalation ladder when the money doesn't come. The new rule, in plain words Section 17(2) of the Code on Wages, 2019 — brought into force with the four Labour Codes on November 21, 2025 — says that when an employee is removed, dismissed, retrenched, resigns, or loses employment due to the establishment's closure, the wages payable must be paid within two working days of that exit. It applies to every employee regardless of salary or designation, and to every kind of exit — resignation and layoff alike. Th...