Which itr form for leave encashment & gratuity

10626 views 3 replies

SB

Others

26 Points Joined July 2014

I was a salaried person and file returns every year using ITR-1 form which includes income from salary and interest income. I worked as a IT professional in a Private company. I resigned the job in October 2013 and received Gratuity after I left. Also as part of final settlement amount I got Leave Encashment of Privilege Leave. It has been added to the taxable income and tax has been deducted by the employer which is also included in Form16 that employer has given me.

Note: This was my second job. I have not received any gratuity or leave encashment income from my previous employer.

I have the following questions:

1] I read that leave encashment is tax free upto 3 lakhs for non-government(private) employees. I received about 1 lakh. Is there any exemption available for this amount ? Can I claim the exemption in IT returns form and ask for a refund ?

2] I also received above 1 lakh as gratuity amount from employer for which tax was not deducted. This gratuity amount is not included in the form 16 given by employer. Since gratuity is exempted from tax, how can I show this in the income tax returns form ?

3] So to summarize, I have Salary (along with leave encashment on resignation) income till October 2013, Bank Interest income and Gratuity income this year. In the light of the questions 1] and 2] which ITR form should I use this year(FY 2013-2014, AY 2014-2015)for filing income tax returns so that I can claim exemption as in questions 1] and 2].

Please consider these queries as urgent, as I have to file IT Returns before July 31,2014.

Thanks.

Replies (3)

CA Deepesh Ruhela

Keen to Learn

3271 Points Joined August 2010

1. Leave encashment treatment

Least of following will be exempted.

Leave encashment Actually received.
Last 10 Month average salary .(average salary explained below)
Maximum amount fixed by the Government from time to time (given below)
Cash equivalent of salary in respect of the period of earned leave to the credit of the employee only at the time of retirement whether on superannuation or otherwise calculated maximum by 30 days maximum for every year of actual service rendered to employer from whose he has retired.

2. Gratuity treatment;

In the case of employees covered by the payment of gratuity act, 1972, any gratuity received by such employees is exempt from tax to the extent of the least of the following –
1) 15 days’ salary (7 days’ salary in the case of employees of a seasonal establishment) based on salary last drawn for each year of service (i.e. 15 days’ salary * Length of Service)
2) Rs. 10,00,000/-
3) Gratuity actually received

In the case of employees not covered by the payment of gratuity act, 1972, any gratuity received by such employees is exempt from tax to the extent of the least of the following –

1) Half month’s average salary for each completed year of service
2) Rs. 10,00,000/-
3) Gratuity actually received

Use ITR 2 to file the return.

It is advisable to you, please consult with CA rather than filing himself.

Tribhuvan Aditya Singh

Student as well as Self-employed

3710 Points Joined September 2007

i agree with above answer.

R T

25 Points Joined September 2014

I am also facing same problem. I wonder if the form 16 of the previous org doesn't say anything about leave encashment and shows that amount as taxable then how income tax dept will know that the amount was received as leave encashment. I thought leave encashment is totally taxable so I paid tax on that too through challan.

Would I need to get modified form16 which will show that this amount (leave encashment) is not taxable like it is showing for gratuity.

As its a reasonable amount I am ready to consult a CA who has a solution for this.