TREATMENT OF LEAVE ENCHASHMENT [section 10(10AA)]
(a) Government employees: fully exempt.
(b) Non-government employees: exempt from tax to the extent of least of the following :
i. Rs.3,00,000 [this limit for whole life]
ii. Leave salary actually received
iii. 10 months’ average salary*
iv. Average salary* of unavailed leaves (total leave entitlement max. 30 days per completed year)
* Average salary: 10 months salary preceding the date of retirement or death
Salary = Basic salary + D.A. if terms Provide for retirement benefits + commission (fixed percentage of turnover.)
Note:
Ø Leave salary received during the period of service is fully taxable. [CIT v. Vijay Pal Singh]
Ø Ceiling limit for whole life is Rs. 300000.00
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