Suman Khurana (ACS) (209 Points)
10 August 2009Hi
Please solve this:
An emloyee worked in Pvt. ltd. company for 1 year 10 months and 6 days. His salary was Rs. 20,000 per month. He was entitled to 30 days leave per year. On the date of resignation, his unavailed leaves were 44 days. Leave encashment received was rs. 33900.
How much leave encashment is taxable?
Regards
Ashish Dug..
(CA (FINAL))
(619 Points)
Replied 10 August 2009
As per sec 10(10AA) of Income Tax Act.
Leave Encashment shall be exempted for a non government employee at the time of retirement :- ( lower of the 4 below)
1. Rs. 300,000.
2. Actual Amount Recd. ie,33,900.
3. 10 * Average Salary ( Avg Salry should be last 10 months salary preceeding the date of retirement.) ie, 20,000/-
10 * 20,000 = 2,00,000/-
4. Average salary * Credit leave in the hands of employee.
20,000*44/30=29,333./-
Therefore the amount being exempted is lower of the four.
Rs.29,333.
And the Taxable Amount is 33,900 - 29,333 = 4,567.
Ashish Dug..
(CA (FINAL))
(619 Points)
Replied 10 August 2009
Give the suggestion if mistake is found.
Suman Khurana
(ACS)
(209 Points)
Replied 10 August 2009
Hi
As far as Calculation at Point No. 4 i.e. 44/30......... is concerned, i want to know while calculating leave standing at the credit of the employee, should we take complete year of service and ignore fraction or take into consideration the fraction also?
Regards
Ashish Dug..
(CA (FINAL))
(619 Points)
Replied 10 August 2009
There is nothing to do with the complete year or fraction of it. We just need to deal with the days of leave. And for calculating the leave days we should take care that we have taken the complete information till the date of retirement..whether it be fraction in days.
CMA RAVI GUPTA
(MT in VPL)
(493 Points)
Replied 11 August 2009
there is a mistake in no. 4which is replied by ashish.
As per sec. 10(10AA) of income tax act max. leave is granted upto 30 days in a complete year and any fraction of year is ignored.So the employee worked 1 year copletely.so total no. of leave deposited in the a/c of employee (30*1=30) or 1 month.so 4 point will be as follows-
Average salary * Credit leave in the hands of employee(in the form of month)
=20,000*1=20,000
thus, 20,000will be exempt
and taxable amount is 33,900-20,000=13,900..........welcome
Manmohan ACA, CS
(Chartered Accountant )
(14243 Points)
Replied 11 August 2009
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Particulars
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(in Rs. )
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Leave encashment received
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33900
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received less exemption u/s 10(10AA) – lower of following
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Actual amount received as leave salary
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33900
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Rs. 300000
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300000
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10 * Average salary p.m (Rs. 20000 x 10)
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200000
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To the maximum of 30 days average salary for every completed year of service, subject to deduction for actual leave availed during the tenure of service. (30 days – 44 days) /30 x Rs. 20000 [ see note 3 ]
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12667
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Lower of (a), (b) and (c) above
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12667
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Taxable leave encashment
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21233
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CMA RAVI GUPTA
(MT in VPL)
(493 Points)
Replied 11 August 2009
hi manmohan,44days r given as unavailed leave.read the question carefully again.it is not availed leave.in this question availed leave is not given.
Balaji D.K.
(Student - BBM)
(26 Points)
Replied 06 November 2009
Hello!!!
The problem reads, " a person is entitled to a leave of 25 days per annum. He has worked for 18 years 3 months. He has availed leave of 250 days".. I intend to know if the leave to the credit of employee be calculated on the basis 25 days p.a. or 30 days p.a.
Waiting for your reply
Regards,
Balaji D.K.
Dheep Chawla
(Assistant Manager)
(22 Points)
Replied 20 February 2012
| Originally posted by : Balaji D.K. | ||
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Hello!!!
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25 days
k.manikanta swamy
(Student CA IPC / IPCC)
(32 Points)
Replied 09 April 2015
| Originally posted by : Suman Khurana | ||
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Hi Please solve this: An emloyee worked in Pvt. ltd. company for 1 year 10 months and 6 days. His salary was Rs. 20,000 per month. He was entitled to 30 days leave per year. On the date of resignation, his unavailed leaves were 44 days. Leave encashment received was rs. 33900. How much leave encashment is taxable? Regards |
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amount actually received =33900 un availed leaves =44 days leaves permitted =30days * actually for one year one month salary number of years worked =1year and 10 months * 12 months = 1 month salary(30 days) 22months= 22/12 = 1.833 months salary*30 = 55 days availed = 11 days un availed = 44 days so total = 44 days salary i.e, = 20000*44/30 = 29333 hence, total taxable is = 33900-29333 = 4567 * thank you for giving me an opportunity kindly inform me if there are any necessary corrections to my solution
manisha
(student)
(28 Points)
Replied 06 August 2016
MAX of 30days should be considered for every COMPLETED YEARS OF SERVICE as per INCOME TAX ACT 1961 in calculation of Average salary * Credit leave in the hands of employee.
as in the case, there is only one completed year of service.
14*20000 = 280000
it is assumed that 30 days in the second year( not completed year) are to be considered to calculate unavailed leave.
and it is assumed that 30days leave can be taken at any moment irrespect of 2.5 days leave per month.
correct me if i'm wrong
Tahlia Wilhelm
(scvshgvch)
(22 Points)
Replied 26 March 2020
When you want a leave form your office then you should know the detail if you have the detail of the best result and people will know the detail. Most of the people on essayoneday will give a better result on the diffrent types of the result.
CAclubindia
