Provision for leave encashment
This query is : Resolved
Soumya Bhat
(Querist)
07 April 2013
Dear Sir,
As per company policy any leave balance eligible for encashment is paid to the employee based on the basic pay (Basic component of CTC).
However for Actuarial Valuation per AS15 we are supposed to value at Gross salary.
Query
If the company carries the provision at gross and pays at the basic rate the provision will always be more. Legally is it ok to do that way. Are we supposed to pay the employees also based on Gross Salary ?
Ex:
Employee A has 10 Days leave to his credit for encashment.
His basic pay is INR 100
His Gross pay is INR 150
Per books the provison we make is for 1500 but if he leaves we pay INR 1000 leaving 500 still in provision.
Is the company supposed to pay INR 1500?
As per company policy any leave balance eligible for encashment is paid to the employee based on the basic pay (Basic component of CTC).
However for Actuarial Valuation per AS15 we are supposed to value at Gross salary.
Query
If the company carries the provision at gross and pays at the basic rate the provision will always be more. Legally is it ok to do that way. Are we supposed to pay the employees also based on Gross Salary ?
Ex:
Employee A has 10 Days leave to his credit for encashment.
His basic pay is INR 100
His Gross pay is INR 150
Per books the provison we make is for 1500 but if he leaves we pay INR 1000 leaving 500 still in provision.
Is the company supposed to pay INR 1500?
28 May 2013
It is very simple. Any company can make their rules for leave encasement either on the basis of basic or gross. Whatever amount is paid for Leave encasement is taxable if it is received during the tenure of service and if it is encased after retirement it is exempted.
You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now
Click here to login now
Similar Resolved Queries
Unanswered Queries
- Employee secondment
- Ito add credit side of bank
- Clarification on GST, TDS, and Accounting Provisions for Import/Export
- Clarification on GST, TDS, and Accounting Provisions for Import/Export Commission Agents,profes. ser
- GSTR9 Annual Return
- Positive Balance in RCM Liability/ITC Statement – Commercial Rent RCM – Guidance Required
- Form 144 TDS Return Validation error
- Applicability of tax on invoice
- Closer of business and itc of capital goods
- LLP audit and disclosure
- Accounting Treatment of Civil work to install PORTA Cabin for office use
- Tally: Imported bank entries do not show up in manual reconciliation
- Confused About My Career After 12th — Cyber Security, AI or Finance? Need Guidance
- FAST-DS 2026 Under Tax Law - No recourse or support for person declaring via this scheme?
- Guidance Needed: Linking Multiple Form 26QB Payments and Responding to ITD Defaulter Notice
- How to pay remaining amount of TDS after due date?
- Resigning a auditor from the company for misconduct
- RCM @ 5% on Hamali charges, Transport Charges, Unloading charges we take ITC or not
- Need Professional Opinion - AY 2012-13 Old Demand & AY 2026-27 Refund Adjustment
- CALCULATION OF DEFFERED TAX - OP BL IS DTL & CURRET IT DTA
Trending Online Classes
-
DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English
CA Bhanwar Borana & CA Shubham Keswani
Subscribe to Pro
Join an elite circle of professionals
CAclubindia
