Dear Members,
Please can anyone tell me about the treatment of Interest on Leave encashed ? The assessee is a retired government employee and the Leave encashment is received by him during retirement. But he is also in receipt of Interest on Leave encashment which does not exceed Rs. 5,000/-. Please help me in resolving this issue.
Thanks & Regards,
Gayatri.R
Hi Gayatri,
If you see the provisions of 'Leave Encashment', you will find that for this purpose, salary includes basic, DA and commission. Nowhere Interest on such is prescribed. Hence, exemption provisions u/s. 10(10AA) will be applicable for the pure leave encashment amount.
Interest will be separately taxable, shall not be subject to exemption and shall be taxable as Salary Income only.
Other views are welcome.
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