Leave salary

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Deepanshu Agg. (Querist)
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22 February 2009 IS leave salary taxable in case of an employee resigning from job?pls quote relevant section of income tax Act.

CA Vivek Jain

CA Vivek Jain (Expert)
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23 February 2009 Leave encashed during the continuation of service is taxable.
In case of leave encashed at the time of retirement or superannuation (leaving the job) the exemption is limited to the least of the following:

10 month's average salary;
Rs. 2,40,000;
Amount actually received
Cash equivalent of leave salary standing to his credit not exceeding 30 days for each year of actual service .
The limit on exemption is applied on the total payment received towards leave encashment from two or more employers, in the same year or in different years.

Salary means last drawn salary and includes basic salary and dearness allowance if terms of employment so provide and also includes commission based on a fixed percentage of turnover.

Average Salary is calculated on the basis of average salary for the 10 months immediately preceeding the retirement or superannuation.

CA Vivek Jain

CA Vivek Jain (Expert)
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24 February 2009 Leave encashed during the continuation of service is taxable.
In case of leave encashed at the time of retirement or superannuation (leaving the job) the exemption is limited to the least of the following:

10 month's average salary;
Rs. 2,40,000;
Amount actually received
Cash equivalent of leave salary standing to his credit not exceeding 30 days for each year of actual service .
The limit on exemption is applied on the total payment received towards leave encashment from two or more employers, in the same year or in different years.

Salary means last drawn salary and includes basic salary and dearness allowance if terms of employment so provide and also includes commission based on a fixed percentage of turnover.

Average Salary is calculated on the basis of average salary for the 10 months immediately preceeding the retirement or superannuation.

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