There's no question of encashing your casual leave as the same has to be availed. On the other hand one can encash the privilege leave depending on the policy of the employer, whether he permits encashment. There are many companies who do not permit leave encashment and leave has to be availed. If not, the company may simply forfeit leave.
On the other hand many companies do allow leave to be encashed, if you have been unable to avail the same. Under such circumstances it may be noted that the privilege leave so encashed is taxable. It may hence be better to avail of your leave then adding to income and then getting taxed.
However, it's important to also note that leave that the Income-tax Act, 1961 (IT Act) allows an exemption if the money is received on retirement for non-government employees. As per Section 10(10AA) of the IT Act, leave encashment is exempt to the extent of the lower of the following: amount actually received from the employer as leave encashment; or cash equivalent.
A good gesture on the part of the government for retired folk.
When to file tax returns
Remember, if you are earning an income in excess of Rs 2 lakhs, its mandatory to file tax returns. There are many individuals who only take into account their salary income. Remember to add all forms of income including interest earned from bank deposits, rent received etc., when filing yout tax returns