Section 10(10aa) (ii)

Hey Atharv! Let’s dive into Section 10(10AA)(ii) and specifically the phrase “employees of that government.”

Section 10(10AA) deals with tax exemption on leave salary received by an employee of a government or other specified entities.
Clause (ii) provides exemption for leave salary received by employees of certain governments or local authorities on retirement or otherwise.

This term refers to individuals who are in service under the specified government (Central, State, or local authorities), meaning they have a contract of employment with the government.
It includes:
- Regular government employees (civil servants, officers, staff employed directly by the government).
- Employees of local authorities, corporations, or boards that are set up by the government.
- Generally, it excludes contractual or outsourced personnel unless explicitly covered by specific rules.
The key is that the employee must be on the government’s payroll or officially employed by it in a substantive capacity.

The exemption applies only to leave salary received by employees who qualify as government employeesunder this definition.
This prevents misuse where persons not actually employed by the government claim this exemption.

Term	Meaning
“Employees of that government”	Persons employed directly by the government or local authority as regular staff or officers. Contractual employees generally excluded unless specified.