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...

"Income up to ₹12 lakh is tax-free now" — you've heard it everywhere since Budget 2025. So you file your return with ₹9 lakh of salary and a couple of lakhs of stock market gains, expecting zero tax… and the portal shows a demand. Nothing is broken. You've just met the least-advertised fine print of the new regime: the ₹12 lakh rebate doesn't cover capital gains. Here's exactly how the trap works, who falls into it, and what you can still do about it. What the ₹12 lakh headline actually says For FY 2025-26 (AY 2026-27), under the new regime, the Section 87A rebate of up to ₹60,000 wipes out the tax on total income up to ₹12 lakh — and with the ₹75,000 standard deduction, a salaried person is effectively tax-free up to ₹12.75 lakh . All true. The fine print: the rebate applies to tax computed at normal slab rates . Income taxed at special rates sits outside it — most importantly: Short-term capital gains on listed equity/equity funds (Section 111A)...

You worked part of FY 2025-26, got laid off, maybe withdrew some EPF, maybe did a little freelancing while job hunting. Now the ITR deadline is approaching and your situation fits none of the standard guides — they all assume twelve tidy months of salary. This one doesn't. Here's how to file when your year broke in the middle, and why doing it carefully usually ends in a refund. The good news first: you probably overpaid tax Your employer deducted TDS every month assuming you'd earn that salary for the full year . You didn't. Your actual total income is lower than what the TDS was calibrated for — which means, for most people laid off mid-year, the government owes you money , not the other way around. But the refund isn't automatic. You get it only by filing the return, and only by filing it correctly. That's the whole reason to read on. And with the new regime's Section 87A rebate making income up to ₹12 lakh effectively tax-free this year (₹12.75 lak...

Getting laid off is hard enough. Then the severance lands in your account — 3, 4, 6 months of pay in one lump sum — and a big chunk vanishes as TDS. Most people accept this as unavoidable. It often isn't. Indian tax law has specific reliefs for retrenchment compensation and lump-sum payouts that neither your employer's payroll team nor the ITR portal will apply for you automatically. This guide explains each one in plain language, for AY 2026-27. First, understand what your "severance" actually contains Your full and final settlement is not one payment — it's several components stapled together, and each one is taxed differently : Retrenchment / severance compensation — the "X months of pay" part. Partially exempt under Section 10(10B), explained below. Notice pay (pay in lieu of notice) — fully taxable as salary. No exemption. Leave encashment — exempt up to ₹25 lakh (for non-government employees, computed per the Section 10(10AA) formula). ...