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Income tax on leave encashment

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AMIT KAUSHIK

Employee

30 Points Posted on 21 May 2020

A Company is under insolvency process. During this management asked to their employees to submit leave encashement request (as management requested, employees taken their leave encashments).

Due to this their income tax slab are changed and their tax deducted as per the applicable rates.

Is any possibilities in this case to get tax exemptions ?

Replies (2)

Quick Summary

This discussion explores the taxability of leave encashment, particularly when a company is undergoing insolvency. Employees who received leave encashment due to management's request saw changes in their income tax slabs. The conversation also touches upon the tax exemption limit for leave encashment under Section 10(10AA)(ii) and raises a query about perquisite tax on leave encashment when employees donate their earned leave to relief funds, with the employer acting as a facilitator.

Aashok Kumar Sharma

Finance/Compliance Consultant

67420 Points Posted on 21 May 2020

Leave Encashment is Taxable as Salary Income and an exemption is provided upto Rs. 3,00,000/- based on the computation provided under Section 10(10AA)(ii)

SANTOSH KUMAR SETHUMADHVAN

24 Points Posted on 21 May 2020

I have a query on leave encashment
our employees have donated earned leave to PM/CM relief fund. The employer became facilitator to convert the Earned leave of employees to money and deposited in the respective account of relief funds of PM / CM.
My question is, whether the perquisites tax on EL encashment need to be calculated even if the employee had directly donated to the relief fund through employer, as a facilitator.