sec.10(10AA)

assumed that there is Non- govt Employees,,

Exemption is least of the following:
1) Rs 3,00,000
2) Leave encashment amount actually received
3) 10 months’ salary (on the basis of average salary of last 10 months ) *
4) Cash equivalent to leave to the credit of employee at time of retirement **

* Here salary means Basic + Dearness Allowance (forms part of pay) + Commission (Fixed % on turnover)

** Cash equivalent to leave to the credit of employee at time of retirement is

= {(A X B) – C} X D

Where

A) No of completed year of service (excluding part of the year)

B) Number of leave credited each year (Subject to maximum of 30 leave per year)

C) Number of leave taken or leave encashed during period of employment

D) Average salary for last 10 months

NOTE:- if employee is retire from the employment due to Termination then Leave encashment shall be fully taxable to the employee