However, in the case of a non-government employee, leave encashment received at the time of retirement is taxable, subject to an exemption which is limited to the least of
Your income tax queries: Private sector employees need to pay tax on leave encashment – Money News | The Financial Express
(i) the actual amount of leave encashment received;
(ii) 25 lakh being the lifetime exemption limit;
(iii) 10 months’ average salary, calculated on the basis of basic salary plus dearness allowance (where DA forms part of retirement benefits) of the last 10 months preceding retirement; and
(iv) the cash equivalent of unavailed leave, computed at a maximum of 30 days’ leave for each completed year of service.
Leave encashment received on retirement is not taxable if it is a central/ state government or local authority employee.
25 lakh being the lifetime exemption limit.
After retirement, I received money from leave encashment. Do I have to pay tax on the entire amount? —Arun Kaushik
Leave encashment received on retirement is not taxable if it is a central/ state government or local authority employee. The entire amount received is fully exempt under Section 10(10AA) of the Income-Tax Act.
However, in the case of a non-government employee, leave encashment received at the time of retirement is taxable, subject to an exemption which is limited to the least of
(i) the actual amount of leave encashment received;
(ii) 25 lakh being the lifetime exemption limit;
(iii) 10 months’ average salary, calculated on the basis of basic salary plus dearness allowance (where DA forms part of retirement benefits) of the last 10 months preceding retirement; and
(iv) the cash equivalent of unavailed leave, computed at a maximum of 30 days’ leave for each completed year of service.
How will I calculate the tax on income received from a patent every year and are there any exemptions? —Neeraj Behl
Income by way of royalty from an eligible patent (i.e., developed with at least 75% of the expenditure incurred in India) received by a resident patentee is taxable at a concessional rate of 10% (plus applicable surcharge and cess) under Section 115BBF, on a gross basis without allowing any deductions.
Alternatively, the patentee may choose to offer such royalty income to tax at the normal slab rates under the applicable head of income and can claim a deduction under Section 80RRB up to3 lakh per year or the actual royalty received, whichever is lower. However, no such deduction is allowed in the new tax regime under Section 115BAC.
I am a salaried taxpayer and last year I opted for the new tax regime. As I have taken a home loan this year, can I opt for the new tax regime when I file income tax returns in July? —Vikas Kumar
Yes, you may opt for the new tax regime underSection 115BAC of the Act while filing your return, even if you have availed a home loan.
However, under the new regime, the deduction for housing loan interest under section 24(b) of the Act is generally not available in respect of a self-occupied property but can be availed for a let-out property, without permitting set-off of any resulting loss against other heads of income.
Accordingly, it is advisable to carry out a comparative evaluation of the old and new tax regimes before exercising the option to determine the more beneficial choice.
(The writer is managing partner, AKM Global, a tax and consulting firm)
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