At the time of termination of service, leave salary received by the Central or State Government employee is fully exempted u/s 10(10AA) Taxpoint: Government employee here does not include employee of local authority or public sector undertaking or foreign Government employee. Case C: Leave salary received by non-Government employee on termination of service At the time of termination of service, leave salary received by a non-Government employee (including employee of foreign Government, local authority, public sector undertaking) is exempted to the minimum of the following u/s a) f13 Actual amount received as leave salary b) 33,00,000/- c) 10 Average salary p.m. d) to the maximum of 30 days (normally taken as 1 month) average salary for every completed year of service subject to deduction for actual leave avaled during the tenure of service Academically: [[(1 x completed year of service) - leave actually taken in terms of month) average salary p.m.] 1 Average salary means Basic + DA + Commission (as a fixed percentage on turnover) being last 10 months average salary ending on the date of retirement or superannuation (e.gif an employee retires on 18/11/2018 then 10 months average salary shall be a period starting from 19th Jan 2018 and ending on 18th Nov 2018) * If DA is not forming a part of retirement benefit then the same shall not be included in salary for the above purpose. However, DA itself shall be fully taxable. 2 While calculating completed year of service, ignore any fraction of the year. Eg. 10 years 9 months shall be taken as 10 years Notes a) Leave encashment received from more than one employer: Where leave encashment is received from more than one employer in the same previous year, the aggregate amount exempt from tax shall not exceed the statutory deduction ie 3,00,000 b) Earlier deduction claimed for leave encashment: While claiming the statutory amount (.e. * 3,00,000) any deduction claimed earlier as leave encashment shall be reduced from 3,00,000 ILLUSTRATION 5 a) Mr. Bhanu is working in Zebra Ltd. since last 25 years 9 months Company allows 2 months leave for every completed year of service to its employees. During the job, he had availed 20 months leave. At the time of retirement on 10/8/2018, he got 1,50,000 as leave encashment. As on that date, his basic salary was 5,000 p.m., D.A. was 2,000 p.m., Commission was 5% on turnover + 2,000 p.m. (Fixed p.m.). Turnover effected by the assessee during last 12 months (evenly) 85,00,000. Bhanu got an increment of 1,000 p.m. from 1/1/2018 in basic and 500p.m.in D.A. Compute his taxable leave encashment salary b) How shall your answer differ if the assessee had taken 2 months leave instead of 20 months, during his continuation of job At the time of termination of service, leave salary received by the Central or State Government employee is fully exempted u/s 10(10AA) Taxpoint: Government employee here does not include employee of local authority or public sector undertaking or foreign Government employee. Case C: Leave salary received by non-Government employee on termination of service At the time of termination of service, leave salary received by a non-Government employee (including employee of foreign Government, local authority, public sector undertaking) is exempted to the minimum of the following u/s a) f13 Actual amount received as leave salary b) 33,00,000/- c) 10 Average salary p.m. d) to the maximum of 30 days (normally taken as 1 month) average salary for every completed year of service subject to deduction for actual leave avaled during the tenure of service Academically: [[(1 x completed year of service) - leave actually taken in terms of month) average salary p.m.] 1 Average salary means Basic + DA + Commission (as a fixed percentage on turnover) being last 10 months average salary ending on the date of retirement or superannuation (e.gif an employee retires on 18/11/2018 then 10 months average salary shall be a period starting from 19th Jan 2018 and ending on 18th Nov 2018) * If DA is not forming a part of retirement benefit then the same shall not be included in salary for the above purpose. However, DA itself shall be fully taxable. 2 While calculating completed year of service, ignore any fraction of the year. Eg. 10 years 9 months shall be taken as 10 years Notes a) Leave encashment received from more than one employer: Where leave encashment is received from more than one employer in the same previous year, the aggregate amount exempt from tax shall not exceed the statutory deduction ie 3,00,000 b) Earlier deduction claimed for leave encashment: While claiming the statutory amount (.e. * 3,00,000) any deduction claimed earlier as leave encashment shall be reduced from 3,00,000 ILLUSTRATION 5 a) Mr. Bhanu is working in Zebra Ltd. since last 25 years 9 months Company allows 2 months leave for every completed year of service to its employees. During the job, he had availed 20 months leave. At the time of retirement on 10/8/2018, he got 1,50,000 as leave encashment. As on that date, his basic salary was 5,000 p.m., D.A. was 2,000 p.m., Commission was 5% on turnover + 2,000 p.m. (Fixed p.m.). Turnover effected by the assessee during last 12 months (evenly) 85,00,000. Bhanu got an increment of 1,000 p.m. from 1/1/2018 in basic and 500p.m.in D.A. Compute his taxable leave encashment salary b) How shall your answer differ if the assessee had taken 2 months leave instead of 20 months, during his continuation of job