Leave encashment

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anil katyal

anil katyal (Querist)
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10 December 2015 is income tax deduct on leave encashment at the time of full and final settlement

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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10 December 2015 Encashment of leave during tenure of service is fully taxable.

Encashment of leave salary at the time of retirement of employee - Section 10(10AA):

1. For Govt Employees (Central Govt and State Govt employees only): Leave encashment of accumulated leave at the time of retirement, whether on superannuation or otherwise, received by a Govt employee, is fully exempt from tax i.e., no tax would be levied on any amount received as leave encashment by govt employees on retirement.

2. For other Employees: Leave encashment of accumulated leave at the time of retirement whether on superannuation or otherwise received by any other employee (except those covered above) is exempt from tax to a certain limit. In such a case, the least of the following shall be exempted:
1. Leave encashment actually received
2. 10 months “average salary”
3. Cash equivalent of unavailed leave calculated on the basis of maximum 30 days leave for every year of completed service.
4. Amount specified by the Govt i.e. Rs. 3,00,000

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