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Tax on leave encashment

trnghosh (sr asst) (207 Points)

22 June 2020

For bank employees at the time of retirement how much tax is exempted from leave encasement amount? Is there any amendment in Section 10(10aa)?

Thanks for your time.

T K Ghosh

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6 Replies

Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 23 June 2020

If the bank is not a private bank and if the bank employee comes under central govt or state govt then leave encashment at the time of retirement is fully exempt..

Else exemption is limited to the conditions stated in Section 10(10aa)..

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Nand (service) (46 Points)
Replied 23 June 2020

Thanks for your reply. But, as the Public Sector Banks and other Govt PSU Companies are allowing only Rs. 3 lacs as exemption,

can you pl throw more light on this with .. ruling or circular of CBDT/Court/Tribunal ruling, which would be of much use. Kindly clarify and share the same.

debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 25 June 2020

if the employee is working in public or govt banks then the tax is fully exempted at the time of retirement

trnghosh (sr asst) (207 Points)
Replied 25 June 2020

What is the status of State Bank of India, is it Public or Govt Bank. I think it is neither a private nor a Government Bank rather one PSU and in that case how much tax will be exempted Rs 3.00 or full at the time of leave encashment ( at the time of retirement).

Eswar Reddy S (CFO- at NHTF) (58270 Points)
Replied 25 June 2020

Then the deduction is subjected to conditions.

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Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 23 August 2020

Leave encashment is fully exempt only for employees of Central and State Government (If received after retirement or superannuation). For the purpose of income tax, PSU/nationalized bank is not considered as government employer. Accordingly, retired employees of public sector undertakings and nationalised banks cannot be treated as government employees. They are not entitled to get full tax exemption on leave encashment after retirement or superannuation under section 10(10AA). Exemption available to them up to limit and as per criteria prescribed for non-government employee.