l I will retire from service after two years. How many days of leave can be encashed tax-free under the new wage rules? —Deepak Rawat
A non-government employee can claim tax exemption on leave encashment received at retirement, subject to a lifetime limit of Rs 25 lakh. For exemption purposes, earned leave is considered up to a maximum of 30 days for each completed year of service, regardless of the higher accumulation permitted by an employer’s leave policy.
While leave encashment received during employment is fully taxable, the amount received at retirement qualifies for beneficial tax treatment, making it advantageous to preserve accumulated earned leave where possible. In contrast, leave encashment received by Central and state government employees at retirement is fully tax exempt.
l I trade in options once in a while and have incurred a loss of Rs 2 lakh in FY26. Can I set off the loss with gains from the equity cash segment? When can I file my ITR?—Sunil Kumar Saini
Losses incurred in Futures and Options (F&O) trading are specifically classified under Section 43(5) of the Income Tax Act as a non-speculative business activity, which provides distinct set-off benefits. This non-speculative classification allows taxpayers to legally set off F&O business losses against income from almost any
other head including short-term or long-term capital gains from the equity cash segment within the same financial year, with the notable exception of salary income. To properly report this, the individual must declare the F&O activity as business income by filing ITR-3. Furthermore, to retain the right to carry forward any unadjusted portion of this loss to future years, it is imperative to file the return strictly before the standard July 31 deadline applicable to non-audit cases. However, if one has availed 44AD under any earlier years, availing the loss in this year may require to have a tax audit done.
l I have received a cash allowance from my employer for meeting sales targets. Do I have to pay tax on the amount? —Manish Kumar
Any cash allowance, performance bonus, or incentive received from an employer as a reward for meeting commercial targets is fully taxable. Under Section 17, such payouts are treated as a direct financial benefit arising from employment and will be taxed at the applicable income tax slab rates. The employer is statutorily required to deduct Tax Deducted at Source (TDS) on this payout, and the entire amount must be reflected in Part B of the employee’s Form 16.
The writer is managing partner, AKM Global, a tax and consulting firm. Send your queries to fepersonalfinance@expressindia.com
Disclaimer: This article is for informational purposes only and should not be construed as tax, legal, or investment advice. Tax rules, disclosure schemes, and government notifications, including FAST-DS 2026, are subject to change based on official gazette notifications. Readers are advised to consult a qualified tax professional or chartered accountant and refer to official Income Tax Department communications before making any compliance or disclosure decisions.
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