Query & Reply:(Misc) ISSUE ON LEAVE ENCASHMENT
P.D.RUNGTA
Query:(Misc) ISSUE ON LEAVE ENCASHMENT
Dear All,
Please guide me in the following query:
Leave Encashment upon Resignation from present employment : -
Whether Tax Liability in the hands of the concerned Employee to be computed on Receipt Basis or Accrual Basis ?
In the present case Former Employer issued Form 16 considering Leave
Encashment
Benefit without disbursing the payment thereof.
Also advice whether the Concerned Employee can avail the benefit u/s. 10(10AA)ii ?
Thanks
With regards
PALAS DE
9830708162
Reply:1
Leave encashment from resignation is also be eligible to get deduction u/s
10(10AA). The key word used exemption under section 10(10AA) is available in
cash equivalent to earned leave at the employee's credit only at the time of
retirement whether such retirement is on superannuation or otherwise. Note the
word otherwise extends the scope to even for normal separation of service as
held in Madras High Court in C.I.T Vs R.V.Shahney [1986] 159 [ITR]. Also note
gere the maximum eligible amount is Rs 3,00,000/-.
Hence, former Company is not correct in their approach.
regards,
Alok Mukherjee
Reply:2
In my opinion the employer has done rightly. Leave encashment accrues on
resignation notwithstanding its tax ability under the Act.
CA. DIPAK KUMAR MITRA
KOLKATA-700001
Reply:3
The amount of Leave encashment shall be taxable in
the hands of the employee when he will receive the amount of money from the
employer. In Sec 10(AA) the amount is taxable in the hands of the
employee only when he receive the amount.
The employer employee relationship has been terminated and so the
empoyer is correct when he considers the leave encashment before
issue of Form 16.
The exemption to the employee u/s 10(AA) is available at the time of his
retirement, at the time of superannuation or otherwise.
Chandan bagaria
Reply:4
salary income has to be always subject to tax on receiots basis.As far as taxability of the receipt in the hands of employee upon resignation ,pl. note that in the following cases the payment has been held to be exempt u/s10(10AA)on the ground that retiremnt includes resignation.
CIT Vs D.P.Malhotra (142CTR325)
CIT Vs R.J. Sahney (159ITR 160(MAD.).
regards
kalidas
Reply:5
Dear Palas
Leave encashment within the limits of 15 days for each completed year
of service
is exempt u/s 10
PREM
bafa...@yahoo.com / pkba...@gmail.com
+91 9339596077
Reply:6
Leave encashment from resignation is also be eligible to get deduction u/s
10(10AA). The key word used exemption under section 10(10AA) is available in
cash equivalent to earned leave at the employee's credit only at the time of
retirement whether such retirement is on superannuation or otherwise. Note the
word otherwise extends the scope to even for normal separation of service as
held in Madras High Court in C.I.T Vs R.V.Shahney [1986] 159 [ITR]. Also note
gere the maximum eligible amount is Rs 3,00,000/-.
Hence, former Company is not correct in their approach.
regards,
Alok Mukherjee
Reply:7
Leave encashment is taxable on receipt basis and therefore the benefit of
section 10(10AA) is available only if the income of the employee concern
include such leave encashment.
Thanks
Arun Gupta
Reply:8
Dear palas salary or any part of salary receipt is always based upon receipt basis . pls correct me if wrong regards ca subas Pradhan
Reply:9
The leave salary will be exemt under section
10(10AA) subject to 10 months salary as per calculation provided in the
section. The exemption may be claimed on cash basis. The exemption is available
on retirement or otherwise which includes resignation.
Bhartia S K
Best Regards,
Pramod Dayal Rungta
M.Com.,LL.B.,AICWA.,DISA(ICAI).,FCA
Member EIRC ICAI (2010-12)
P.D.Rungta & Co.
Chartered Accountants
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Ramesh Kumar Bajoria
Since Section 10(10AA)(i) clearly states the word 'Payment received' hence it is always on actual receipt basis.However .the stage between sanction of leave incashment and credit to the asses-see's account may be a matter of judicial review and further complex legal interpretation again to be studied thoroughly after taking into account various legal decisions co-relating other sections of the act.
(10AA) (i) any payment received by an employee of the Central Government or a State Government as the cash equivalent of the leave salary in respect of the period of earned leave at his credit at the time of his retirement whether on superannuation or otherwise ;
Kalidas Ramaswami
Regards
Kalidas
Date: Thu, 27 Aug 2015 10:36:24 -0700
From: ramesh.b...@gmail.com
To: foru...@googlegroups.com
Subject: [CA RUNGTA PD] Re: Query & Reply:(Misc) ISSUE ON LEAVE ENCASHMENT
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