Re: [aaykarbhavan] RE: Leave salary exemption

Please read carefully and ...............

C A Shah D J

USA

Taxability on Leave Salary under Section 10(10AA) of Income Tax Act

Income from Salary, 7

Leave salary also known as leave encashment which means that employee will receive the cash for leaves which are not taken by the employees. Employee can encash his leaves during the course of employment but this amount will be fully taxable or he can encash at the time of retirement but the taxability of that amount depends on fulfillment of the certain conditions given under the income tax act.

Also Read Income Tax Calculation on Pension Income 

For Government Employees except local authorities leave encashment at the time of retirement is exempted from the tax u/s 10(10AA). While leave encashment during the service period is taxable for all the employees and its taxable as per the income tax slab rate which is applicable to that individual.

1. At the time of services:
   
   Amount received Fully Taxable
   
2. At the time of retirement:
   
   1. Government employee (central or state) – Fully exempt
      
   2. Non-Government employee
      
      Exempt least of the following:
      

• Actual Receipt
  
• Standard Limit=3,00,000 (maximum- reduced by an earlier exempted amount)
  
• Total salary of preceding 10months from the date of retirement
  
• average salary of 10months X leave credit
  

Calculation of Leave credit at the time of retirement

Leave entitlement- completed service X standard leave (consider max. 30 days)

Less: Leave already availed

Less: Leave encashed during the service period

Leave credit at the time of retirement

• (Leave credit should be in according to 30 days leave of every year of actual completed services)
  

Note: – salary= Basic pay + DA (if) + commission (%)

Average salary= (Basic pay + D.A.(if)+ % commission of 10 months immidetly @preciding from the date of retirement)/10

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From: S B <casb2013@yahoo.in>
To: "aaykarbhavan@yahoogroups.com" <aaykarbhavan@yahoogroups.com>
Sent: Friday, 26 July 2013 2:56 PM
Subject: [aaykarbhavan] RE: Leave salary exemption

 

 

Query on Leave salary section 10(10AA)

 

Basic salary for the past one year Rs. 50,000

Leave days encashed on leaving the service 28 days

was Employed in Private co.

Leave encashment received  Rs. 127,000

 

what would be the leave salary exemption.

 

Thanks in advance

 

Seema

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