leave encashment

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om prakash sharma (Querist)
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06 May 2008 As person has taken applied for leave encashment in the month of March-08, but has got sanctioned in the month of April-08 and payment was also disbursed in the April-08.

Now my question is that -

Whether it should be booked as liability in the month of March-08 by booking as expense for march-08, or it should be booked in the month of April-08 as expense.

If it booked it in the month of march-08, whether company is liable to deduct tax in the month of march-08 itself.

and finally, when it will be taxable in the hand of employee, in the previous year 2007-08, or in the previous year 2008-09

kindly reply.

Amit Sharma

Amit Sharma (Expert)
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06 May 2008 Dear sir,

According to me leave encashment comes under the head "salary" and the basis of this head is as follows:-

(a) On receipts basis or accural basis whichever is ealier.

In the above case it is accural basis, which means to say that is should be booked in Mar -08. and through this all your questions are answered.