Taxability Of Leave Encashment For Psu Employee - DOCX Download - CiteHR
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Nathrao
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Pon1965
Construction
Simar88
Employee

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A person retired from an Indian PSU bank on 31.03.2015. He received leave encashment on 08.04.2015. Kindly guide whether the above income shall be added to the income for the year 2014-15 or 2015-16 for the purpose of tds deduction.
For govt employees, it is fully exempt from tax u/s 10(10AA)(i). Pon
Pon1965,
Only State and Central government employees are entitled for tax exemption for leave encashment on retirement/superannuation.
The definition of “Government Employee” is not specifically given in I T Act-1961. But the Act has incorporated the PSU employees, Government undertaking employee, Local Authorities employees etc in various other Sections / clauses of the Income Tax Act-1961 wherein benefit is meant to be conferred to them. The same is not there in Section 10(10AA).
So PSU bank employee would need to cross check before working out tax.
This is my opinion unless some rule has changed in this context recently.

NATHRAO,
As already stated by you, the said amount is surely taxable after some partial exemption as provided under the Act
.
The main concern here is regarding the assessment year in which this income is to be taxed for the purpose of TDS deduction.
Kindly suggest in light of the rule that salary income is taxable on the basis of due or received whichever is earlier.

As far as my opinion goes-the year in which LE was actually receieved F/Y 2015-16 A/Y 2016-17
A write ups on the subject are attached for your guidance. Ofcourse there are other circumstances as discussed u/s 10 of IT Act under which certain relief will be available provided the separation is due to termination resulting a scheme approved by the Govt. on account of closure of an establishment. But for the present case the attachment might help to the extent required. The queriest should also try relief u/s 89 (1) if found beneficial which require detailed workings to support your IT returns.
Also you can learn some more from this link
Tax, tax rates, income tax advice, tax advice, tax planning, news, advice, income tax act, finance act, tax deductions, ELSS, ULIP, PPF, life insurance, infrastructure bonds, mediclaim


Attached Files
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File Type: docx Leave Salary encashment on Retirement etc.- Exemption.docx (16.4 KB, 598 views)
File Type: docx How to reduce tax on your Retirement Benefits.docx (58.2 KB, 130 views)
File Type: pdf Retirement-Benefits-Theoretical.pdf (1.14 MB, 207 views)

As far as specific query of poster goes-LE is being received on retirement.
The concerned person is not a government servant-so no tax exemption beyond a limit.
The tax will fall due in the year in which he retired that is F/Y 15-16 and no relief under Sec 89(1) is admissible in this specific case.
However I advice poster to cross check all this info with his tax consultant.

ongc officer retired and received leave encashement on retirement. employer deducted Rs.3lacs u/s10(10AA)(ii), where as I feel he is entitled to exemption u/s10(10AA)(i) like any other central govt servant as ONGC is owned by central govt ministry of petroleum and natural gases. Am I correct?
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