tax on leave encashment on retirement

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  1. Kanaiyalal madhvani

    Kanaiyalal madhvani New Member

    The provision of section 10A(AA) regarding exemption of leave encashment on retirement which is applicable to Govt/State Govt. employees is aslo applicable to public sector undertaking like nationalised bank employees ? Few tax consultants say it is allowed. Please guide me in this regard.
     
  2. Chandrashekar M

    Chandrashekar M Active Member

    If Leave salary encashment is received by any employee while in employment then it is fully taxable in the hands of employee. While if leave encashment is received in case of retirement or superannuation or resignation, then exemption is available U/s.10(10AA) upto the following limits.
    In case of Central government or State government employee(excluding employees of a local authority or statutory corporation) – Fully Exempt
    In case of any other employee
    Least of the following is exempt:-
    · Actual amount received
    · 3,00,000
    · 10 months average salary
    · Average salary x leaves at the credit of an employee (leaves cannot exceed 30 days for every completed year of service, fraction of a year is to be ignored)
     
    Last edited: Apr 7, 2016
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