Exemption of leave encashment to Bank Employee or PSU

[Lav Prajapati]

Whether employees of Nationalised Banks and Public Sector Undertakings are Government Employees ? And Leave Salary Encashment received by them is fully exempt or exempt upto specified Limit.

AI Summary

Bank and PSU retirees get leave encashment tax exemption only up to Rs.25,00,000 under section 10(10AA) Employees of nationalised banks and public sector undertakings are not treated as Central/State government servants for Income-tax purposes; therefore leave salary encashment on retirement for such employees is exempt only up to the statutory ceiling (currently Rs. 25,00,000 under section 10(10AA)), whereas leave encashment received by Central or State government employees enjoys full exemption. Tribunal and high court decisions have applied this distinction and tax authorities follow the specified monetary limit when allowing exemption to retired bank/PSU employees.