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Leave encashment at retirement

25 July 2020

whether the limit of 3 lakhs exemption for encashment of leave at retirement for non government employees has been removed now?

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Maryam Hasan Meem (Student) (448 Points)
Replied 26 July 2020

Leave encashment received by Non-Government employee is EXEMPT based on the computation provided under Section 10(10AA)(ii) and Balance Amount if any is taxable as ‘income from salary’

COMPUTATION under section 10(10AA):

Leave encashment received Less Exemption under Section 10(10AA)
LEAST of the following:

1. Statutory limit- Rs 3,00,000

2. Actual leave encashment amount.

3. Average salary* of last 10 months

4. salary per day * unutilised leave (considering maximum 30 days leave per year) for every year of completed service.

*Salary for this purpose includes basic salary, dearness allowance and commission based on fixed percentage of turnover secured by employee.

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