Encashment of leave salary

section 10(10aa)

T Y B.COM (C)
PREPARED BY :
Ganesh Bhandary 346
Anil Bhanderi 347
Jinal Bheda 348
Shweta Chad 349
Henil Chheda 350
 What is leave salary?
Leave salary is
 GOVERNMENT EMPLOYEES
Government employees referes to the employees of
the state government or central government.

Any amount received as cash equivalent of leave

salary in respect of the period of earned leave at his
credit at the time of retirement/ super annuation is
exempt from tax Sec 10 (10AA)(i)

For government employee leave encashment is

exempt at the time of retirement.
 NON – GOVERNMENT EMPLOYEES
Non-government employees include employees of
local authorities or bodies like municipal corporation
or panchayats.

Non-government employees leave salary is

taxable during the services and is exempt at the time
of retirement or super annuation from tax u/s
10(10AA)(ii).
 It is available to the following extent:
i. cash equivalent of the leave salary in respect of
earned
 LEAVE SALARY

Encashed during Encashed on

the service. retirement.
Fully taxable for Exempt u/s
all employees 10(10AA)

Government Other
Employee. Employee
Fully Exempt
 Other employees
Leave Credit multiplied by Average Salary per
month.

10 months multiplied by Average salary per

month.

Actual amount received.

Rs. 30,000.
 AVERAGE SALARY
Salary includes basic salary, dearness allowance,
and any commission received by employee as a fixed
percentage of sales or turnover.

Here, considered the average salary for 10 months

immediately proceeding the month of your
resignation or retirement.