Unearned leave
This query is : Resolved
P.Madhivadhanan
(Querist)
03 July 2025
A teacher who retired from service in tamilnadu government got Rs.272263 at the time of retirement as UNEARNED LEAVE SALARY (UEL) . Whether it is taxable or exempt under section 10(10)AA (i). She is a state government employee.
12 August 2025
Taxability of Unearned Leave Salary (UEL):
Section 10(10AA)(i) of the Income Tax Act provides exemption for leave salary received by an employee at the time of retirement.
However, the exemption is applicable only to earned leave salary.
Unearned leave salary (i.e., leave not actually earned or availed but paid at retirement) is generally not exempt under Section 10(10AA).
Specifics for Government Employees:
For government employees, the rules of exemption depend on whether leave salary is earned or unearned.
Typically, earned leave salary is exempt under Section 10(10AA)(i).
Unearned leave salary paid at retirement is taxable as salary income.
Conclusion:
The Rs. 2,72,263 received as Unearned Leave Salary is taxable under the head "Salaries."
It will not be exempt under Section 10(10AA)(i).
The teacher should include this amount in her income and pay tax accordingly.
Section 10(10AA)(i) of the Income Tax Act provides exemption for leave salary received by an employee at the time of retirement.
However, the exemption is applicable only to earned leave salary.
Unearned leave salary (i.e., leave not actually earned or availed but paid at retirement) is generally not exempt under Section 10(10AA).
Specifics for Government Employees:
For government employees, the rules of exemption depend on whether leave salary is earned or unearned.
Typically, earned leave salary is exempt under Section 10(10AA)(i).
Unearned leave salary paid at retirement is taxable as salary income.
Conclusion:
The Rs. 2,72,263 received as Unearned Leave Salary is taxable under the head "Salaries."
It will not be exempt under Section 10(10AA)(i).
The teacher should include this amount in her income and pay tax accordingly.
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