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Dear All,
Can any body tell me whether the leave encashment, gratuity and service weightage is covered under income tax or not? If yes , are there any conditions?
Second, Is any employee in entitled for increase in salary revision after leaving an organization? Person left on 30July, hike in salary was suppsoed to be declared in July end but could not be declared due to some organizational reasons. Lateron revision came in Sep end but effective from 1st July onwards. Is he entitled? If yes then july salary, gratuity, service weightage is required to calculated again and arear of salary, gratuity ....should be paid or not?
Request comments in this regard.
regards
pksagar

If the settlement does not confine the revision only to the employees existing in service as on the date of settlement, then the left employee will be eligible to get it as arrears. Accordingly the gratuity has to be reworked and difference paid.
Leave encashment is subject to income tax deduction like any other component of salary whereas gratuity subject to a maximum as provided in the Payment of Gratuity Act (Rs 10 lakhs) is not taxable. Any amount paid over and above it will be subject to tax.
Regards,
Madhu.T.K

Thx Madhu Ji for your comments. First part is not clear to me. Please elaborate. What is legally correct?
In settlements it may be mentioned that "this settlement is applicable to those employees who are on roll as on the date of settlement". If that is the case, even though the settlement will have retrospective effect ( say from July 2010) the same will not cover the employees who have left service before the settlement becomes effective (say in Oct). On the other hand, if it is silent but only states that it will have a retrospective effect from July, then the employees left will be eligible for arrears and other benefits offered in the settlement.
Regards,
Madhu.T.K

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