Relief u/s 89 for leave encashment

Does relief u/s 89(1) is application for Leave Salary received at the time of retirement / resignation. If yes, how to calculate the relief.

Replies (2)

Pls. guide me in respect of calculation of relief u/s 89 for receipt of Leave salary on resignation. Whether calculation given under Rule 21A(2) (i.e. relief for Arrears of Salary) shall apply for Leave salary also. Pls. guide.

Thanks 

Regards

PRADEEP PATIL

 

 

Computation of relief in case of relief when salary has been received in arrears or in advance under section 89(1) (in terms of section 89 read with rule 21A):

1. Calculate the tax payable on the total income, including the additional salary of the relevant previous year in which the same is received. 
2. Calculate the tax payable on the total income, excluding the additional salary of the relevant previous year in which the same is received. 
3. Find out the difference in tax at (1) and (2) above. 
4. Compute the tax on the total income after excluding the additional salary in the previous year to which such salary relates.
5. Compute the tax on the total income after including the additional salary in the previous year to which such salary relates.
6. Find out the difference in tax at (4) and (5) above. 
7. The excess of tax computed at (3) over the tax computed at (6) is the amount of relief admissible u/s 89(1). No relief is however admissible if the tax computed at (3) is less than the tax computed at (6). In such a case the assessee–employee need not apply for relief. 

 

 

Thanks

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