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Leave encashment

04 October 2020

please somebody tell me the calculation of leave encashment , my uncle retired so the leave encashment mention in form 16 Rs. 300000 and received in bank Rs.988000 so how can I calculate please help

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 04 October 2020

(a) Government employees: Leave salary received at the time of retirement is fully exempt from tax.
(b) Non-government employees: Leave salary received at the time of retirement is exempt from tax to the extent of least of the following:
(i) ` 3,00,000
(ii) Leave salary actually received
(iii) 10 months’ salary (on the basis of average salary of last 10 months)
(iv) Cash equivalent of leave (based on last 10 months’ average salary immediately preceding the date of retirement) to the credit of the employee at the time of retirement or death. Earned leave entitlement cannot exceed 30 days for every year.

Notes:Leave salary received during the period of service is fully taxable.

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ashima (accountant) (24 Points)
Replied 04 October 2020

on form 16 leave encashment is 300000 ,that means he is not fully exempt

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 04 October 2020

For Government employees it's fully exempt.

If he is not a government employee, than Exempt up to amount as per above calculation.
(Maximum Exemption limit is 3,00,000)

ashima (accountant) (24 Points)
Replied 04 October 2020

He is central govt employee its also mantion in govt employees form 16 Rs 300000 ir not

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 04 October 2020

For Central Government employees, it's fully Exempt.
He was Employee in which department or Company ? can you elobrate

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NARAYANA PRASAD K (CLERK) (31 Points)
Replied 10 January 2021

It is learnt that for IT purposes PSU employees are not given the status of government employees. There is a Delhi High court verdict regarding this between Kamal Kumar Kalia and others v/s Union of India