Section 10(10aa) (ii)

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

What is Section 10(10AA)(ii) about?

• 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.

Interpretation of “employees of that government”:

• 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.

Why is this important?

• 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.

Summary: