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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hello pankaj sir
i m completing my graduation before some period
now i want to pay two year Nil returns so how can i pay
and what processor i have to do i have no income at now
Sir, What are the tax exemption rules of leave encashment in of case Board/Corporations of State Govt.? Are the employees considered as State Govt. employees for full exemption of tax on amt recd as leave encashment.
@Aarti
They won't be considered as Govt employee.
AFTER 35 year searvice I got retirement on 30/4/15 from HPSEB and observe in SJVNL. I have 300 day leave in my account pl tell me the amount as i get as leavein cashment be exempted or taxable
@Moti Ram
yes it would be non taxable, but upto Rs 3 lakhs only.
Can you show an example of how to calculate cash equivalent of leave?
@Sarvesh
Lets say total service years: 17. Max non taxable leaves allowed per year = 30. Total leaves max which can be tax free = 17*30 = 510.
cash equivalent of 510 leaves depends on company policy.
If company pays only basic salary for leave encashment, then cash equivalent portion = 510 * last drawn daily basic salary.
If company pays full salary for leave encashment, then cash equivalent portion = 510 * last drawn daily salary.
Thanks sir.
Hello Sir,
I have changed my job couple of month back & my previous employer taken the leave encashment in taxable income on the income statement provided to me for my current employer.
I have checked and found that Leave Encashment paid to me should be exempt from tax.
Please advise if I should get my income statement corrected or I can take exemption of the same while filling my income tax return.
@Vishal
If you can get income statement from previous employer corrected, it would be better.
Else, you would have to ask for refund while filing income tax return.
Thanks Sir,
I have discussed to change my income statement from my previous employer but they seems reluctant to do so. Please advise where I should make the adjustment of exempted leave encashment while filling the return.
is this figure needs to be deducted from total taxable income (then figure will be mismatched in return from form 26AS & 16)
Please advise.
Regards,
Vishal
@Vishal
Yes, you need to deduct amount from total taxable income. Figure would mismatch in form 16, and if a enquiry comes from IT department, you have to reply with your leave encashment exemption statement.
Hi
Same is the case with me .. My Employer also added LE as taxable salary .. Has anybody got refund from IT in same case ..
Please reply
Thanks
A Sharma
I was retired from central bank of india and received rs. 476000/-as leave encashment. Pl clarify whether I shall get full exemption or max amt for rs. 300000/-
@Madhab
Max exemption in your case can be 3 lakhs only.
I got retirement on 31/1/15 from bank. I got 5.60 as 8 months' leave encashment. What about tax?
@Iqbal
Only amount upto Rs 3 lakhs would be non taxable.
Dear Pankajji
I am transferring my money Rs.5 lac to my wife's account and she open Rs. 5 Lac FD in bank. Also filling form 15G in her name to avoid TDS. and if i showing this money as loan amount to her and showing interest income of Rs. 1000 -3000 in my income while ITR. by this way can i save tax on FD interest income to avoid clubbing of income. Also by this way can i get FD interest tax free?
@Sameer
I won't suggest such arrangement, just to avoid tax.
If IT department catches it, they can demand the extra tax amount and penalty.
which form is required to be filled online for claiming relief for leave encashment on retirement.
@Pankaj
As such there is no separate form, you can reduce taxable amount by leave encashment amount.