leaving time tax on leave encashment

[udit gupta]

Dear Sir, Please suggest me :- Q:- What will be tax if Ramesh leaving company on Dated 10.10.10 and his basic salary of Rs. 3,00,000 and his payable leave is 58 Days then what will be tax calculation. please solve and advice me. Regards Udit

[CA Rachit Agarwal]

Refer Section 10(AA)(ii)- Assumed the above is not Government Employee

1. Leaving the company is on account of retirements, then only exemptions would be available.

2. Not more than 30 days leave should have accrued each year.

3. 58 days salary would be calculated on the basis of 10 months average salary last drawn.

AI Summary

Leave encashment tax: exemption hinges on retirement status, accrual limits per year and calculation using ten-month average salary. Entitlement to exemption for leave encashment requires termination by retirement and adherence to the annual leave accrual limit; for a non-government employee the exemption applies only if not more than thirty days' leave accrued each year. The payable encashment (58 days in the query) must be computed using the ten-month average of the last drawn salary to determine the amount eligible for exemption; failure to meet the retirement or accrual conditions renders the encashment taxable.