Leave encashment non taxable

View Comments

• Thanks Pankaj , will u suggest me to attach my relieving documents / full and final settlement documents with ITR in which it is clear that leave encashment is done after resigning and relieving from the company?

  • @Jaykumar
    No document needs to be attached with ITR. It won't be accepted by IT department.
    In case they need any clarifications, they can send letter later while processing the return.

• Thanks Pankaj !!!

• I've submitted wrong return because I wasn't aware of this rule. In my form 16 b employer has shown leave encashment as income. Please help, how do I revise the return already filed.

  • @Supriya
    You need to file revised income tax return u/s 139(5). You can reduce taxable income as shown in form-16 by the leave encashment exempted amount.

    Procedure is same as original one. Only difference would be following things:
    1. Return filed under section: Revised 139(5)
    2. Whether original or revised return: R-Revised
    3. Receipt No
    4. Original filed return date

    • Thanks a lot :)

• My previous employer has considered leave encashment as taxable income in my FFS .Do I need to get it corrected by them or I just need to take care of this while filing the return for FY 2013-14. Please suggest.

  • @Vinay
    You need to get exemption for same while filing income tax return, in case employer does not provide same in form-16.

• I had leave my company and joined new company in april 2013. Now in full and final settlement from my previous company i had got leave enchashment amount of 101 leaves(accumulated during my 7.5 years tenure ). Is this amount is taxable? please suggest

  also i want to know that i had also get variable pay from my previous company of last year now. So i want to ask that i have to show this variable pay amount in my income of this year ? or i didn't show this income as my previous employer had not deduct any tax on this amount.

  • @Sameer
    Leave encashment would be non-taxable 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

    You should show variable pay amount in this year's income and pay tax on same. I believe this is like a bonus payment.

    • Sir;

      i had received Rs. 85000 amount as my leave encashment of 101 No leaves (accumlated during my 7.5 yrs service ). and during last 10 months my base salary was 25000 pm and with other perks salary was around 53900 pm. So how much leave encash amount is taxable out of Rs. 85000?
      also sir my previous company had deducted short notice period amount with service tax in my full and final settlement. now i have to deduct the same notice pay amount in showing my previous employer income detail.
      please suggest

      • @Sameer
        I would also need two more figures to compute leave encashment non taxable figure:
        1. Leave entitlement for every year of service (no of days)
        2. Leave availed while in service (no of days)

        • 30 leaves per year- 240 No for 7.5 years service and 139 leaves availed during the 7.5 year and
          101 leaves balance after availing remain leaves

        • @Sameer
          Rs 84,167 would be non taxable in your case.
          The cash equivalent of leave balance = ((leaves entitlement per year * duration of service) - leave availed)/30) x (basic salary+DA per month)
          = ((30*8-139)/30)x 25000 = 84,167

        • thanks sir for prompt reply.

          but as per Maximum of 10 months of leave encashment, based on last 10 months average salary is it also non taxable?

          and sir what about notice pay deducted with service tax to show in current incometax for previous employer income. have i to subtract notice pay amount from previous employer income?

        • @Sameer
          The exemption is to be limited to minimum of all below:
          1. The actual amount received: Rs 85,000
          2. The cash equivalent of leave balance (max 30 days per year of service): Rs 84,167
          3. Maximum of 10 months of leave encashment, based on last 10 months average salary: Rs 2,50,000
          4. Rs. 3 Lakhs

          Point 2 is minimum here so exempted amount would be Rs 84,167 only.

          There is no exemption/deduction for notice period payment. Its an expense and cannot be deducted from income.

        • THANKS SIR

• Dear Sir;
  I want to know that i had made FD and recurring deposit in bank and interest earned during the year would be around 17000, TDS for the same is also deducted during maturity time in this year. Now my question is i have to show this fd interest amount in actual investment form to my employer? or i can shown it during time of income tax return filing? and how to file this additional tax of fds during return filing time? please suggest

  • @Sameer
    If you declare this interest and TDS with your employer, in case there is some extra tax, it would be taken care of by employer by deducting from salary. This would save any later hassles and self assessment/advance tax payment by you.
    You can also compute tax on total income (including FD/RD interests) yourself and pay remaining taxes, if any and show same in income tax return.

• I resigned in Dec2013 and got a leave encasement in Dec salary while I am on notice period. My question is leave encashment during notice period is taxable or not?

  TIA,
  girish,

  • @Girish
    As its paid after resignation, you can can take it as non-taxable.

    • Thanks Pankaj,

      You mean to say the leave encashment during notice period is not really taxable and I should ask my employer to reconsider the taxation on leave encashment?

      Or I have to take care of this amount my self while filing ITR in for 2013-14.

      ~girish.

      • @Girish
        You can request employer to consider leave encashment as non taxable. If they don't agree, it can be taken care while income tax return filing.

• my employer asks for proof of bank interest certificate for deducting additonal tax from salary and i asked bank (sbi) to give interest certificate, but sbi person said to give this certificate after march-14.

  So after march how i pay this additional bank interest tax- is there any way to online paying for this additional tax- and if yes please tell where and how pay this. Also in tax return where this tax i have to show.
  also please suggest while filling tax return what is taken care for the TDS deduction at bank,so there will no problem afterward.

  • @Sameer
    You can pay extra income tax yourself here: https://onlineservices.tin.egov-nsdl.com/etaxnew/tdsnontds.jsp
    In income tax return, it would be shown under self assessment tax.
    TDS deducted by bank would also be put in ITR under TDS other than salaries section.

• Sir, what is a status of autonomous body, shall be considered as government organization or as non government organization under section 10(10AA) .

  • @Arvind
    I think, it would be assumed as non-government organization.

• SIR, I HAVE 100 DAYS EL AND 200 DAYS HPL AT MY CREDIT AS ON DATE. I AM A PUBLIC SECTOR EMPLOYEE. WHAT IS THE TAX LIABILITY FOR ME SINCE I AM GOING TO RETIRE ON 31.05.2014. MY EMPLOYER TOLD THAT THEY WILL NOT DEDUCT TAX ON MY EL BUT THEY WILL DEDUCT TAX ON HALF PAY LEAVE THOUGH BOTH COMES TOGETHER IS LESS THAN RS.3,00,000/-. I AM ARGUING THAT YOU WILL DEUCT TAX BEYOND RS.3,00,000/-FOR MY EL AND HPL ENCASHMENT BOTH CLUB TOGETHER. WHICH IS CORRECT AS PER INCOME TAX RULES.
  THANKING YOU SIR

  • @A Nageswara
    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

    In case your employer does not agree to deducting taxes above 3 lakh amount only, you can ask for refund while filing income tax refund.

    • THANK YOU PANKAJ GI FOR YOUR REPLY