Arrears of terminal surrender of leave .
This query is : Resolved
20 May 2016
Can the arrears of terminal surrender of earned leave on account of pay revision be claimed on receipt in case of an employee of a wholly owned subsidiary of a nationalized bank?
22 May 2016
would the experts reply?
14 July 2024
Yes, the arrears of terminal surrender of earned leave on account of pay revision can be claimed in the year they are received by an employee, including those of a wholly owned subsidiary of a nationalized bank. Here’s how it typically works:
1. **Taxation of Arrears of Salary/Earned Leave**:
- Arrears of salary, including terminal benefits like earned leave surrender, are taxed in the year they are received.
- The taxability of these arrears depends on when they are paid or received by the employee.
2. **Claiming Relief under Section 89(1)**:
- If the arrears relate to a previous year (PY) and are received in a subsequent year (Assessment Year - AY), relief can be claimed under Section 89(1) of the Income Tax Act, 1961.
- Section 89(1) allows for the computation of tax on the total income including the arrears, and the difference between the tax so computed and the tax that would have been payable had the arrears been received in the relevant previous year can be claimed as relief.
3. **Specific Case of Wholly Owned Subsidiary of a Nationalized Bank**:
- Employees of a wholly owned subsidiary of a nationalized bank are generally treated similarly for tax purposes as employees of the nationalized bank itself.
- The tax treatment of arrears of salary or terminal benefits would follow the general principles mentioned above, where the arrears are taxed in the year of receipt, and relief can be claimed under Section 89(1) if applicable.
### Example:
- If the earned leave surrender arrears relate to a previous year (e.g., PY 2020-21) and are received in the current year (AY 2021-22), they would be included in the income for AY 2021-22.
- Relief under Section 89(1) can be claimed for the tax payable on these arrears, calculated based on the tax rates applicable in the respective years.
### Conclusion:
Arrears of terminal surrender of earned leave on account of pay revision can be claimed on receipt by an employee of a wholly owned subsidiary of a nationalized bank. They are taxed in the year they are received, and relief can be claimed under Section 89(1) for the tax liability on these arrears, based on the provisions of the Income Tax Act, 1961. For accurate advice tailored to your specific circumstances, consulting with a tax advisor or CA would be beneficial.
1. **Taxation of Arrears of Salary/Earned Leave**:
- Arrears of salary, including terminal benefits like earned leave surrender, are taxed in the year they are received.
- The taxability of these arrears depends on when they are paid or received by the employee.
2. **Claiming Relief under Section 89(1)**:
- If the arrears relate to a previous year (PY) and are received in a subsequent year (Assessment Year - AY), relief can be claimed under Section 89(1) of the Income Tax Act, 1961.
- Section 89(1) allows for the computation of tax on the total income including the arrears, and the difference between the tax so computed and the tax that would have been payable had the arrears been received in the relevant previous year can be claimed as relief.
3. **Specific Case of Wholly Owned Subsidiary of a Nationalized Bank**:
- Employees of a wholly owned subsidiary of a nationalized bank are generally treated similarly for tax purposes as employees of the nationalized bank itself.
- The tax treatment of arrears of salary or terminal benefits would follow the general principles mentioned above, where the arrears are taxed in the year of receipt, and relief can be claimed under Section 89(1) if applicable.
### Example:
- If the earned leave surrender arrears relate to a previous year (e.g., PY 2020-21) and are received in the current year (AY 2021-22), they would be included in the income for AY 2021-22.
- Relief under Section 89(1) can be claimed for the tax payable on these arrears, calculated based on the tax rates applicable in the respective years.
### Conclusion:
Arrears of terminal surrender of earned leave on account of pay revision can be claimed on receipt by an employee of a wholly owned subsidiary of a nationalized bank. They are taxed in the year they are received, and relief can be claimed under Section 89(1) for the tax liability on these arrears, based on the provisions of the Income Tax Act, 1961. For accurate advice tailored to your specific circumstances, consulting with a tax advisor or CA would be beneficial.
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