ManualsIncome Tax
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Leave salary exemption under section 10(10AA) limited by average salary and statutory caps, yielding the lowest applicable ceiling.
Computation of leave salary exemption under section 10(10AA) requires determining average salary by annualising ten months' basic pay plus the proportion of dearness allowance included for retirement benefits and dividing by ten. Unavailed leave months equal total entitlement minus leaves taken and leaves earlier encashed. The exempt leave salary is the least of (unavailed months x average salary), (ten months' average salary), and the statutory ceilings; the example selects the lowest applicable ceiling as exempt.