NUMERICALS OF TAX TREATMENT OF LEAVE ENCASHMENT
INCOME UNDER THE HEADS OF ‘SALARIES’
Mr Sourav, an employee of a mercantile firm, retired on 30th November 2018, at a monthly salary of Rs 12,000 pm after completing his 24 years and 8 months of service and received Rs 1,68,000 as leave encashment for 14 months. From the following information calculate the taxable amount of leave encashment of Mr. Sourav:
a) Leave entitlement: 40 days for each year of completed service
b) Leave availed while in service: 18 months
c) Leave standing to the credit at the time of retirement:14 months
d) Average Monthly Salary Rs 11,700
Ans: 97,800
Shri Swapan, an employee of XYZ Pvt. Ltd, retired from the company on 30th November, 2018. At the time of his retirement he received Rs 1,50,000 as leave salary from his employer.
From the following information calculate the taxable amount of leave encashment of Shri Swapan for the assessment year 2019-20:
a) Salary at the time of retirement(per month): Rs 9,000
b) Period of service: 20years 10 months
c) Leave availed of while at service 14 months
d) Unavailed leave at the time of retirement 16 months
e) Average salary for the last 10 months till Nov 2018 Rs 8,800
f) Leave entitlement as per service rules: 1 ½ months for every completed year of service.
Ans: 97,200
Mr Rahul retires from his employment after rendering service of 23 years and 8 months. At the time of retirement he received Rs 4,00,000 as leave salary. His salary at the time of retirement was Rs 14,000 pm. He was entitled to take 40 days of leave for every year but he availed only 4 months leave in his service. Calculate taxable leave salary.
Ans: 2,60,000
Mr. Sridhar, employee of ABC Ltd., received Rs 36,000 as leave salary at the time of retirement 31-01-2020. On the basis of the following information, determine the amount of taxable leave salary. Basic pay Rs 3,000 pm since 2017. Duration of service 22 years and 8 months. Leave to his credit at the time of retirement is 12 months on the basis of 45 days entitlement of leave for encash completed year of service.
Ans: 33,000
Mr. Sharma retires on 30-09-2019 after 20 years of service and received Rs 96,000 as leave encashment for 12 months. His employer allows him 1 ½ month leave for every one year of service. He has already encashed leave for 18 months. His salary for 2018-19 was Rs 6,000 and from 1-4-2019 it was raised to Rs 8,000 pm.
Compute the amount of taxable leave encashment and Gross salary if Mr. Sharma is a:
a) Govt. Employee
b) Non-Govt. Employee
