Leave Encashment

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srinath k (Querist)
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25 January 2010 Dear Sir,

Pls. let me know whether leave encashment paid is taxable or not ? In some of the income tax computation, i understood that LE is partially exempt. If so, pls. let me know the limit of exemption.

with BEST rgds,

Srinath

CA Prashant Gupta

CA Prashant Gupta (Expert)
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25 January 2010 if leave salary is received during service it is taxable for all.
if leave salary is received at the time of retirement/leaving job for Govt. Employees it is tax free u/s 10(10AA).
if leave salary is received at the time of retirement/leaving job for Non-Govt. Employees then minimum of belwo is exempt:
1 10 x avg monthly salary.
2 Rs 300,000/-
3 leave encashment received.
4 accumulated leave in months x Avg monthly salary

Avg monthly salary= avg of immediately 10 month salay basic+DA if terms of employment so provided+commission of fixed % of turnover.
accumulated leave = 30 days for every completed year. now substract leave avail rest is accumulated leave

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