Section 10(10AA) - Leave Encashment

Q & A Forum › Category: Tax Planning › Section 10(10AA) – Leave Encashment

Saurabh asked 8 years ago

Hi, I have a query related to tax treatment for leave encashment at the time of resignation (private company). There are multiple articles which says that leave encashment is not taxable both in case of retirement and resignation, though there are some limits to it. Please find following links

https://goo.gl/K1grdF
https://goo.gl/s3myE6

However, my company, after resignation, in its full and final settlement, is not considering this leave encashment as non taxable amount. I could see that while filing IT return, in tab "taxes paid and verification" we can declare the non taxable amounts. There is a dropdown for section 10(10AA) as well to report this amount. Please advise if i shall reduce this leave encashment amount while calculating salary in tab "Computation of income and tax" (after reducing other components like telephone reimbursement etc). Please let me know if my query is not clear.

2 Answers

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Sreekanth Staff answered 8 years ago

Hi, Suggest you to kindly go through my article on this topic and let me know if your query is still unresolved; Leave Encashment & Tax Implications

Saurabh replied 8 years ago

Hi Sree, As per the article, it is pretty clear that leave encashment received in full & final settlement after resignation is non taxable (with certain threshhold). So, even if on traces, I can see complete amount (including this amount of leave encashment), i can reduce leave encashment amount to put final salary figure on IT return calculation page. I can show this amount where one can declare non taxable income (for reporting purposes).

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Sreekanth Staff answered 8 years ago

Hi, Yes, only taxable part is added to other taxable allowances and filled in 'Allowances Taxable'

Your understanding is correct.