Income From Salary

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KOUSHIK (Querist)
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28 July 2009 In August'08 I had left one company and joined another. In last company 45 days notice period was there. But I had left the job within 6 days and thereby supposed to pay 39 days pay to the company. I had also 19 days leave credit in my account. So during Final settlement I had got 19 days amount as Leave Encashment, but paid 39 days amount as Notice Pay.

Now my question is,
i)whether amount paid as notice pay can be adjusted against salary income ?
ii) Whether Payment against leave adjustment is exempted as leave salary?

Abhishek Mohta

Abhishek Mohta (Expert)
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29 July 2009 i) Amount paid as notice pay can be treated as Salary refund. So it can rightfully adjusted against the salary income.

ii) Leave encashment received is fully taxable. It is exempt only in case of government employees.

Prakash Kanaka M.P.

Prakash Kanaka M.P. (Expert)
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29 July 2009 ii) Leave encashment at the time of voulantary retirement/resignation is exempted upto Rs.3.00 Lacs. In your case its being 19 days and i feel the amount will be definately less than 3 Lacs. Hence it is exempted.

As per Law:
Scope of exemption under section 10 (10AA) Iii)- Exemption under section 10 (10AA) is available whether such retirement is on supernauuation or otherwise.
The word otherwise covers the case of retirement which take place not at the time of superannuation but any other time. According to the Madras Hight court in CIT vs RV Shehney " voluantary retirement from service is one such case which comes with the four corners of the expression " otherwise than superannuation".

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