Taxability of Leave Salary
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Leave salary is an part of salary component which accrues to every employee and this income pertains to the leaves not availed by employee during the year.
In every organization, there are paid leaves available to each employee where they either can utilize it for their personal purposes or they can encash it. Any Leave salary income earned by the employee would attract income tax which needs to paid by employee.
Therefore, considering the importance of tax on leave salary, it is important to know the provisions of Income Tax Act, 1961. Following are the important points that needs to be considered:
- Provisions of Section 10(10AA) of Income Tax Act, 1961 deals with Tax on Leave Salary.
- In order to evaluate the provision of tax in this respect, it is important to first check whether employee is an Government employee or Non Government employee.
- Government employee includes Central Government employees as well State Government employees.
- In case of Government employees, any leave salary received by such employee would be exempt from Income Tax.
- In case of Non- Government employees, least would be exempt:
- Leave salary actually received
- Rs 300,000
- 10 (X) average salary per month
- Leaves at the credit of employee (X) average salary per month
Here, average salary means salary of last 10 months immediately preceeding the date of retirement and maximum leaves that can be considered for each completed year would be 30 days and credit leaves would mean Total leaves (maximum 30 days)- Leaves availed/leave encashed.
I hope you have like our above article, and it might helped you to gain some knowledge about Leave salary taxability.
You might be wondered to read fee important points that need to be considered when it comes to Salary Income, please click on the link given below and gain some insight about salary Income.
https://taxationinsight.com/taxability-of-salary-income-important-things-to-know/
Team Taxation Insight
