Tax on Arrears of Leave Encashment.

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  1. Atul Borkar

    Atul Borkar New Member


    After referring to Section 10AA of income tax act it is clear that there is no tax on leave encashment at the time of superannuation in cases of Govt. Employees.

    Would like to know that in case of non Govt. employees if minimum tax exemption is on Rs. 3 lakhs & tax exemption is already given upto Rs. 2 Lakh in previous year (Say assessment Yr.2013-2014) & arrears of leave encashment say for ex. 5 lakhs is to be paid in assessment year 2014-15.

    In this case, whether remaining exempted amount (of assessment Yr 13-14) of 01 lakh be carry forwarded to assessment yr 2014-15 & total taxable leave encashment amount of ass. yr 14-15 will be 4 Lacks (ie. 5 Lakh arrears - 01 lakh tax exemption of yr 13-14)

    Atul Borkar
  2. rudrabose

    rudrabose Active Member

    Tax on complete Rs. 5 Lakhs would be levied.

    Benefit of remaining exempted amount of the year to which this amount pertains wont be allowed.
  3. Atul Borkar

    Atul Borkar New Member

    Thanks Rudra.

    This information is of great help to me.
  4. auditya

    auditya New Member

    dear sir,
    with due regards to what you have said, i think leave encashment received during service is completely taxable.
    where as any amount received by the non govt employees will be exempted upto certain extent.
    This 3 lakhs amount is allowed over the life time of an assessee .
    there is no compulsion in the act that the said exemption has to be availed in a single previous year.
    So , if 2 lakhs was received at the time of retirement and claimed as exemption in any earlier previous year then at the time of retirement from another job , the assessee can avail exemption upto 1 lakh.( 300000-200000=100000 b/f )
  5. Your logic is convincing but does it convince the IT department?
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