LEAVE ENCASHMENT ON SUPERANNUATION

PAYMENT OF LEAVE ENCASHMENT AT THE TIME OF RETIREMENT IS FULLY EXEMPT FROM INCOME TAX SINCE BEGINING  As per Chapter-III of Income Tax rule clause 10 (10AA) Sub section 2nd  the payment received by an employee other than central Government or State Government likewise Bank Insurance, PSU at the time of his retirement is fully exempt if you have receive leave encashment payment at the time of retirement is less or equal to the entitlement of the Cabinet Secretary of Central Government.  At present the salary of the Cabinet Secretary is 2.925 Lacs per month so his leave encashment entitlement is 29.25 Lacs. The employee who covered under subclause-II is entitled to take the exemption up to 29.25 Lacs as per rules. The existing rule is crystal clear there is no doubt. The employee retired in financial year 20-21 and Tax deducted as source and claimed only 3 lacs exemption at the time of filing return are suggested to claim full exemption by filing revised return up to 31st March 2022. 

WHETHER IT IS  TRUE

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Quick Summary
This discussion clarifies the tax exemption rules for leave encashment received upon retirement. For government employees, leave encashment is fully exempt from income tax. For other employees, the exemption is capped at the leave encashment entitlement of the Central Government's Cabinet Secretary, which is currently around 29.25 Lakhs. It's important to note that the deadline for filing a revised tax return to claim this exemption for the 2020-21 financial year has passed (31st March 2022).

Govt Employees (Central Govt and State Govt employees only): Leave encashment of accumulated leave at the time of retirement, whether on superannuation or otherwise, received by a Govt employee, is fully exempt from tax. No tax would be levied on any amount received as leave encashment by govt employees on retirement.

You cannot file a revised return now because the last date to file a revised return was 31st March 2022

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