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leave encashment on retirement

Anil (Ex. Manager) (24 Points)

24 July 2019

my colleague is retired on 24.10.2018 from a nationalized bank and have received leave encashment of rs.587000 on superannuation.
Whether entire amount of leave encashment is exempted from income tax, please advise.

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3 Replies

Y GOPI REDDY (GREAT POLITICAL LEADER) (378 Points)
Replied 24 July 2019

Exempted only to the extent of lower of limits computed under section 10(10AA)

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Bhaskar (Accounts Executive ) (91 Points)
Replied 24 July 2019

Dear Sir,

Leave encashment received at the time of either retirement or resignation is either fully or partially exempt depending upon the category that an employee falls under. This has been elaborated further below:

1) Leave encashment received by Central or State Government employee at the time of retirement or resignation is fully exempt

2) Leave encashment received by legal heirs of deceased employee is fully exempt

3) 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’

Thanks & Regards

Bhaskar

K H HAVEWALA (4 Points)
Replied 25 July 2019

If a government employee, fully exempt as per Section 10 (10AA)(i). For other employees covered by Section 10(10AA)(ii), exempt upto Rs 300000/- as per extant provisions. Central Government is empowered by law to revise but the ceiling of Rs 300000/- stands as it is since many years.