Leave encashment of Mr XYZ on retirement of government employee

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This discussion clarifies the tax exemption for leave encashment received by government employees upon retirement. It confirms that payments made to Central or State Government employees for earned leave at the time of retirement are fully exempt from income tax under Section 10(10AA)(i) of the Income Tax Act. For non-government employees, the exemption is limited to Rs. 3 lakhs, with any excess amount being taxable.

PARDEEP KAPIL

PARDEEP KAPIL (Querist)
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22 November 2021 One of my client retired on 15-06-2018. He got leave encashment amounting to Rs.11,00,000. His basic salary + DA is Rs.3860.00 per day / Rs.1,17,417.00 per month. Please let me know his eligibility which is exempt from Taxable income. Kind Regards

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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22 November 2021 Leave encashment received by Central or State Government employee at the time of retirement or resignation is fully exempt.
Leave encashment received by Non-Government employee is exempt based on the computation provided under Section 10(10AA)(ii) and balance amount if any is taxable as ‘income from salary’ (Maximum amount deductible is Rs. 3 lakhs)

PARDEEP KAPIL

PARDEEP KAPIL (Querist)
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22 November 2021 Dear Rambhia ji... Thanks for reply... Kind Regards

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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22 November 2021 You are welcome...

PARDEEP KAPIL

PARDEEP KAPIL (Querist)
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23 November 2021 SIR :: Please once again :: Client is a retired government employee. Please let me know is 11,00,000 of leave encashment is fully exempt.. Regards

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 November 2021 Yes fully exempt u/s. 10(10AA)(i) of IT act....
For your satisfaction, read ... the sub section...
Section - 10, Income-tax Act, 1961.... Incomes not included in total income.
10. In computing the total income of a previous year of any person, any income falling within any of the following clauses shall not be included— ......
(10AA) (i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise; ....

PARDEEP KAPIL

PARDEEP KAPIL (Querist)
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23 November 2021 Once again....Thank you...

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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23 November 2021 My Pleasure ............

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