LEAVE ENCASHMENT AND NEGATIVE LEAVE DEDUCTION

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2010 THIS IS B. NITYA POOJA REDDY. I AM WORKING IN REPUTED CONSTRUCTIONS COMPANY FROM 2006 ONWORKDS.

QUESTION NO. 1

LEAVE ENCASHMENT IS SHOWN OR NOT IN ANNUAL RETURN (SALARY RETURN?

IF YES PLEASE CLARIFY, IF NO THAT IS ALSO CLARIFY.

QUESTION NO. 2

I HAD LEAVE NEGATIVE BALANCE FROM AUG-2008 TO APRIL-2009 DUE TO MY MARRIAGE. IN THAT TIME COMPANY HAS NOT DEDUCTED MY SALARY DUE TO PERSONAL REQUEST AND PAID FULL SALARY IN THAT PERIOD. IN MAY-2009 THE ENTIRE NEGATIVE LEAVE BALANCE AMOUNT WAS DEDUCTED FROM MY SALARY AND FOR RECOVERY PURPOSE COMPANY CREATED LOAN A/C ON MY NAME AND ENTRY PASSED AS UNDER.

LOAN A/C DR

TO SALARY & WAGES.

(LEAVE NEGATIVE BALANCE DEDUCTED UP TO APRIL-2009).

AFTER THAT THE COMPANY HAS DEDUCTED THE AMOUNT IN SIX INSTALMENTS FROM MY SALARY.

THE ABOVE MENTIONED AMOUNT i.e. DEDUCTED AMOUNT OF LEAVE NEGATIVE BALANCE IS APPLICABLE FOR MY ANNUAL RETURN OR NOT?

PLEASE CLARIFY THIS. WHY BECAUSE OUR COMPANY TAX DEPT. NOT CONSIDER THAT AMOUNT IN MY ANNUAL RETURN.

CMA. Dinesh S Adhikari, ACMA

CMA. Dinesh S Adhikari, ACMA (Expert)
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06 January 2010 1) Leave Encashment is taxable under section 10(10)A. You received Leave Encashment during the service period will be taxable in your hands.

2) You can take exemption in Second case, because company provided that amount to you as a Loan, and loan is not taxable in the hands of Employee. However, this was interest free loan, therefore, Some portion(only exempt interest amount but not whole amount) will be taxable as perquisites as "INTEREST FREE LOAN PROVIDED BY EMPLOYER" and computation will be as per section 17(2).

Regards!!!
Dinesh S. Adhikari

Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2010 IT MEANS THAT LEAVE NEGATIVE BALANCE DEDUCTION AMOUNT IS CONSIDER IN MY ANNUAL RETURN AS A EXEMPTION?

CMA. Dinesh S Adhikari, ACMA

CMA. Dinesh S Adhikari, ACMA (Expert)
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07 January 2010 Yes,
But not a exempt salary but as a Loan Amount, Because Company deducted that portion(which earlier provided as salary) from your salary as a Loan amount.

But take care of that INTEREST AMOUNT which will be taxable as a perquisite.

Regards!!!
Dinesh S. Adhikari

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