As per section 10(10AA) of income tax in india, leave encashment amount received by employee by a previous employer in full and final statement, is non-taxable. So If you have changed a job in financial year and received leave encashment for the remaining earned leaves (ELs) Just deduct the amount from total income and compute the income tax on top of that.
Payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.
In case of other employees, the exemption is to be limited to minimum of all below:
1. The actual amount received
2. The cash equivalent of leave balance (max 30 days per year of service)
3. Maximum of 10 months of leave encashment, based on last 10 months average salary
4. Rs. 3 Lakhs
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I have retired from Punjab State Power Corporation Ltd on 30.4.2013 a Govt.of Punjab undertaking. I have received a sum of Rs.6,19,370/- as leave encashment. The department has deducted income tax on 3,19,370/- (6,19,370-3,00,00) amounting to Rs.65,370/-. Some of my colleague who have retired have got refund of income tax deducted on Leave Encashment from IT department through income tax consultant (advocate). I want to get refund of Rs.65,370/- by directly filing my income tax statement through e-filing. If you can advise me about this through my email. Thanks.
@Rajinder Singh
You can simply reduce this extra 3,19,370 from taxable income and file returns. IT department would issue refund for extra tax deducted.
However, as your were not state/central govt employee, If assessing officer raises query on taxability, refund may be denied.
Hello,
Can you please help me on the following?
1. Which section do I declare in ITR1 the leave encasement amount which I got at the time of my resignation?
2. Which section do I declare in ITR1 the gratuity amount which I got for the first time of my resignation?
I think both are non-taxable. Please clarify.
@Uttam
You will have to use ITR-2 and show these amount under Exempt income section.
HI,
I was informed that leave encashment is non-taxable only at the time of returement and not for changing jobs. My ex-employer used to encash un-used leaves every year for all employees. In this case, will it be non-taxable?
Also what about gratuity? is it non-taxable?
@Deepesh
If leaves are encashed while in service, they would become taxable.
In case one leave job, it would be non-taxable upto Rs 3 lakh for all such payments received from all employers.
Gratuity would be non taxable upto Rs 10 lakh for non-govt service, if five years are completed with employer. The limit of 10 lakh applies to the sum of all gratuities received from one or more employers in the same or different years.
Thanks Pankaj. Another suggestion required for below problem. My final settlement from previous employer came in the month of April 2014. They have given me breakup of gross salary and tax paid. Should i just add that GROSSsalary to the GROSS in my new employer's form 16 and also add the tax paid there with new TDS and submit?
Since i left the job @ exemployer i guess my leaves encashed will be non-taxable. How can i submit this exemption?
Thank you
The final settelement from exemployer came in April 2013 (not April 2014...sorry for typo)
@Deepesh
Yes, you would need to add income from salaries from both form-16s and show same in ITR.
You would need to fill ITR2 and show leave encashment exemption under sheet:PARTB - TI - TTI - SAL, in Schedule S in 2 (iv) section.
Hi Pankaj,
Could you please help me to understand in ITR 2 where should I add vacation encashment amount?
In my form 16 its part of salary. Where should I include it to get tax exemption benefit?
@Varun
You would need to fill ITR2 and show leave encashment exemption under sheet: PARTB – TI – TTI – SAL, in Schedule S in 2 (iv) section.
Thank You Pankaj, Its really helpful.
I have two more question
1. I have long term capital gains through stocks. If I am right there is no tax on such gains but I am not getting where can I show such gains in ITR 2
2. I forget to declare LIC with my employers and now to take benefit of 80C I would like to declare that amount. If I am filling my return by my self , is it fine if I will add that amount in 80C or to claim benefits which are not in form 16 , I need to fill return by CA's only?
@Varun
1. In EI sheet of ITR-2, there is a section named as Long-term capital gains on which Securities Transaction Tax is paid.
2. Yes, you can claim LIC policy premium payment under 80C section yourself. There is no need of CA here.
Hi Pankaj,
Could you help me to understand in ITR 2 where should i fill medical reimbursement and conveyance amount of my form 16?
Also in Schedule S my salary should include medical reimbursement and conveyance or exclude?
@Vishal
There is no option to mention medical reimbursement and conveyance allowance in income tax return forms.
Your income under head salaries should be mentioned after deduction of these allowances only and should be same as per form-16 issued by employer.
Dear Sir
In the assessment year 2014-15, I recieved full salary for the month of April for which a TDS of Rs 7794 was deducted and submitted. I received full and final settlement which included full salary for month of may and exgratia full and final settlement for amount 2.23 lac having leave encashment of rs 20000 appx and PF deduction of rs 16074. No TDS was deducted. I want to know if this fund received is taxable and will this amount will get added to the income I generated after I joined another firm
@Pramod
Yes, amount is taxable.
The amount mentioned as income from salaries in form 16 issued by previous company would be added to taxable income.
Sir, I am employed in PSU.
and availed 86 no. of EL this year.
Leave entitlement is 30 day/year.
My basic pay is some 28000 Rs and DA is some 25000 Rs. So Basic +DA is 53000 Rs.
Received amount 153000 Rs as Encashment.
Sir as I dont comes under category of Job changes or Retirement. tell me if there any scope for Tax exemption in EL encashment. my retirement year is 2043.
@Nitin
As you have encashed leaves during employment, there won't be any income tax exemption on the amount received.
Sir
I received 30 day pl encashment 10 days before resignation from punjab national bank amt 14000 so it is taxable or not. 2013
@Ashvani
As amount received while in service, It would be taxable.
Dear. sir
i got qatar visa and also agreement from the company so i applied for ecnr how long it will take to get passport with ecnr kindly letme know please.
thanks
@Mohammed
Under normal application, it would take 30-40 days.