Leave Encashment
Leave Encashment or Earned leave [Sec. 10(10AA)]
Meaning– Earned leave means the leave accrued to the employee in proportion of the work done by him. This varies from employer to employer.
Encashment during service–Fully taxable
Encashment after retirement–
For Government Employee–Encasement of utilized earned leave at the time of retirement of Government employees– Fully exempt
For Non-government Employee–
Encasement of utilized earned leave at the time of retirement of the Non-government.
least of the following shall be exempt
Actual amount received
Utilized earned leave × average monthly salary
10 month average salary
₹ 3,00,000.
while computing unutilized earned leave, earned leave entitlement cannot exceed 30 days for each completed year of service rendered to the current employer.
Average salary = Average salary of the last 10 months immediately preceding the retirement.
Salary= Basic pay + DA( to the extent it forms part of retirement benefits) + turnover based commission.
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