Leave Salary exemption u/ss 10(10AA)
This query is : Resolved
27 June 2016
I resigned from the job and received leave salary of Rs. 25000 from my previous employer. Then I joined another job. Will my leave salary exempt??
28 June 2016
Leave Salary is taxable
28 June 2016
In any case, leave salary will be taxable
02 August 2024
Under Section 10(10AA) of the Income Tax Act, the exemption for leave encashment varies depending on whether the encashment is received during service or at the time of retirement. Here's a detailed look at how this applies to your situation:
### **Section 10(10AA) Overview**
**1. **Section 10(10AA) of the Income Tax Act**:
- **Subsection (i)**: Provides exemption for leave encashment received by government employees at the time of retirement or resignation.
- **Subsection (ii)**: Provides exemption for leave encashment received by non-government employees (which includes employees of private companies, public sector enterprises, etc.).
**2. **Exemption for Non-Government Employees**:
- For non-government employees, the exemption under Section 10(10AA)(ii) is subject to the following conditions:
- The exemption amount is limited to the least of:
- Actual leave encashment received
- Amount calculated based on the number of days of leave encashment
- ₹3,00,000 (from FY 2018-19 onwards) or the limit prescribed for the financial year.
### **Application to Your Situation**
1. **Received Leave Salary of ₹25,000**:
- Since you received leave encashment of ₹25,000 from your previous employer and then joined another job, the exemption under Section 10(10AA) would apply.
2. **Exemption Calculation**:
- The amount of ₹25,000 is below the exemption limit of ₹3,00,000. Therefore, the full amount of ₹25,000 received as leave encashment would be exempt from tax under Section 10(10AA)(ii).
### **Summary**
- **Leave Encashment Exemption**: The leave encashment you received from your previous employer (₹25,000) is exempt from tax under Section 10(10AA)(ii) of the Income Tax Act, as it falls within the allowable exemption limit.
- **Tax Filing**: Ensure to report the leave encashment in your income tax return, and the exemption should be applied correctly to avoid any tax on this amount.
For the most accurate and personalized advice, especially if there are additional complexities or changes in regulations, consider consulting a tax professional or financial advisor.
### **Section 10(10AA) Overview**
**1. **Section 10(10AA) of the Income Tax Act**:
- **Subsection (i)**: Provides exemption for leave encashment received by government employees at the time of retirement or resignation.
- **Subsection (ii)**: Provides exemption for leave encashment received by non-government employees (which includes employees of private companies, public sector enterprises, etc.).
**2. **Exemption for Non-Government Employees**:
- For non-government employees, the exemption under Section 10(10AA)(ii) is subject to the following conditions:
- The exemption amount is limited to the least of:
- Actual leave encashment received
- Amount calculated based on the number of days of leave encashment
- ₹3,00,000 (from FY 2018-19 onwards) or the limit prescribed for the financial year.
### **Application to Your Situation**
1. **Received Leave Salary of ₹25,000**:
- Since you received leave encashment of ₹25,000 from your previous employer and then joined another job, the exemption under Section 10(10AA) would apply.
2. **Exemption Calculation**:
- The amount of ₹25,000 is below the exemption limit of ₹3,00,000. Therefore, the full amount of ₹25,000 received as leave encashment would be exempt from tax under Section 10(10AA)(ii).
### **Summary**
- **Leave Encashment Exemption**: The leave encashment you received from your previous employer (₹25,000) is exempt from tax under Section 10(10AA)(ii) of the Income Tax Act, as it falls within the allowable exemption limit.
- **Tax Filing**: Ensure to report the leave encashment in your income tax return, and the exemption should be applied correctly to avoid any tax on this amount.
For the most accurate and personalized advice, especially if there are additional complexities or changes in regulations, consider consulting a tax professional or financial advisor.
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