Leave Encashment U/S 10(10)(A)

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This query is : Resolved

CA Anil Jain (Querist)

27 November 2007 IN Leave encashment income tax allow us to encash the unavailed leaves @ 30 per completed year of service.If 25 leave are allowed in the company & employee worked for 2yrs.5 months & availed no leaves.HE encash all leaves i.e.725(29*25) as per company policy .
Now my Ques. is that whether he will be allowed 625
(25*25) or all 725 or any other?

Regards,

Anil Jain.

Chinmay

Chinmay (Expert)

28 November 2007 For Govt. Employees - Exempt

For Non-Govt. Employees

Least of the following is exempted:
1. Actual Amount Received
2. Rs. 3,00,000
3. Avg. 10 months salary
4. Cash equivalent of the leave salary in respect of the period of earned leave to the credit of the employee at the time of retirement.

Now in your case the amount refered in point 4 will be calculated as under :

Leaves - 25 x 2 i.e. 50 days
(here 25 is the leaves that can be taken in a year and 2 is the no. of years the employee has worked, it will not be rounded off even if the employee worked for 2 yrs and 11 months)
So,
Leave = 50 days
less: leaves availed = 0
therefore leave credited at the time of retirement are 50 days... so simply calculate the salary for 50 days taking avg. salary of 10 months as the base.

CA Anil Jain

CA Anil Jain (Querist)

28 November 2007 But company give the encashed leaves in the fraction year also i.e.for 5 months also, now my query is tht when leaves are allowed less than 30 days in a year whether the criteria of unavailed leaves calculated on the basis of 30 days for each completed year will apply or not