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 Exemptions for Retirement Explained: Section 10(AA)(ii) and 30-Day Annual Accrual Limit Clarified. A query was raised regarding the tax implications on leave encashment for an individual leaving a company with a basic salary of Rs. 3,00,000 and 58 days of payable leave. The response advised that under Section 10(AA)(ii), exemptions apply if the departure is due to retirement. Additionally, it was noted that no more than 30 days of leave should accrue annually, and the calculation for 58 days of salary should be based on the average salary drawn over the last 10 months.