I was a government employee, For a.y. 2017-18, My total income was Rs. 9 lac, out of which I receied retirement E/L encashment of Rs. 5.5 lacs, which is non-taxable even then my employer deducted TDS of Rs. 80 thousand on it, so while e-filing ITR, I showed my income 9-5.5=3.5 lac only to get refund on retirement EL encashment, but recently I received an intimation under section 143(1)(a) from IT department about mismatching in data between form 16 and ITR filed, so now how can be I able to get refund which I deserve.
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Is leave encashment fully taxable?
(i)Leave Encashment during service is fully taxable in all cases, relief u/s 89(1) if applicable may be claimed for the same.
(ii) Any payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.
(iii) In case of other employees, the exemption is to be limited to the least of following:
(a) Cash equivalent of unutilized earned leave (earned leave entitlement can not exceed 30 days for every year of actual service)
(b) 10 months average salary
(c) Leave encashment actually received. This is further subject to a limit of Rs 3,00,000 for retirements after 02.04.1998.
(iv) Leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable.
Since you are Government servant E/L is fully exempt at the time of retirement. but it has to be shown in 26AS without deducting TDS.
You have to reply to the notice explaining all this. Your income is 3.5lakhs only.
Submit your reply electronically along with requisite proof.
In ITR-1 -26 (d) you should explain details (exempt income)
"govt employee leave encashment at retirement u/s 10(10AA)(i)" 550000
Dont worry, the mismatching might have taken place when your return had been compared with 26 AS. Infact the A.O had given an oppurtunity to you to rectify and respond before he makes some adjustment. There with in the time respond to the notice.
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