Leave encashment

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MANGESH SHANTARAM MOHITE

MANGESH SHANTARAM MOHITE (Querist)

18 February 2012 Respected sir,

i just watn to ask you about whether leave encashment is taxable.

its urgent,

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)

19 February 2012 (A)Leave salary received by any employee during the period of service.

Leave salary received by any employee during the period of service is fully Taxable. however relief under section 89 read with rule 21A can be claimed (Circular no 431 Dated September 12,1985)
(B)Leave Salary to At the time of Retirement /superannuation or otherwise.

(i) Leave salary to Central/State Government employee
Leave salary given to Central/State Government employees at the time of retirement /superannuation in respect of period of earned leave at his credit ,is fully exempted.{section 10(10AA)(i)}
(ii)Leave salary given to other employee (non Central/State Government employee is exempted as per detail below.{section 10(10AA)(ii)}
Least of following will be exempted.

1. Leave encashment Actually received.
2. Last 10 Month average salary .
3. Maximum amount fixed by the Government from time to time presently Rs.3 Lac
4. Cash equivalent of salary in respect of the period of earned leave to the credit of the employee only at the time of retirement whether on superannuation or otherwise calculated maximum by 30 days maximum for every year of actual service rendered to employer from whose he has retired.

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