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Leave Enchment for Bank Employee

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Dibyendu Kumar Majumder

42 Points Posted on 09 September 2020

I Retired from Bank S BI on 05.01.2019 received Rs.800000 from leave Encashment.it is fully Exempted under section 10(10A) or not.

Replies (2)

Quick Summary

This discussion clarifies the tax exemption for leave encashment received by bank employees upon retirement. While government employees may receive full exemption, PSU bank employees like those from SBI are subject to limits under Section 10(10AA). The exempt amount is the least of the actual encashment, Rs. 3 lakh, or a calculation based on average salary and unutilised leave.

Deepak Gupta

CA Student

15932 Points Posted on 09 September 2020

PSU employees are considered as non-government employees.

Hence, not fully exempt. Least of the following is exempt [10(10AA)(ii)]

Rs. 3 lakh
LS actually received
10 months average salary²
Unutilized earned leave¹ X average monthly salary/30

Note-1: earned leave entitlements cannot exceed 30 days for each completed year of service ^{ignore fraction}
Note-2: Average Salary³ of last 10 months immediately preceding the retirement
Note-3: Salary = Basic + DA (if part of retirement benefits) + commission as a fixed percentage of turnover