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Tejas Chokshi  |126 Answers  |Ask -

Tax Expert - Answered on Aug 07, 2023

CA Tejas Chokshi has over 20 years of experience in financial planning, income tax planning, strategic and risk advisory, banking and financial products and accounting and auditing.
He is an information system auditor, a forensic auditor and concurrent bank auditor.
Chokshi, who has a master’s degree in management, audit and accounting from Gujarat University, has completed his CA from the Institute of Chartered Accountants of India.... more
Asked by Anonymous - Jul 27, 2023Hindi
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Can I claim tax exemption of Rs 3 lakhs as non-government employee on money received through HPL encashment at the time of retirement ? The employer has not mentioned about this exemption in Form 16. Question arises as the tax notification mentions about Earned leave.

Ans: according to Section 10(10AA) of the Income Tax Act, 1961, leave encashment received by a non-government employee at the time of retirement is eligible for a tax exemption up to a certain limit. As of my last update, the exemption is provided to the extent of least of the following three amounts:

The actual amount of leave encashment received.
The amount specified by the government (Rs. 3 lakhs in this case, as you mentioned).
The average salary of the last 10 months preceding retirement, multiplied by the number of days of earned leave at the credit of the employee at the time of retirement, divided by 30.
If your employer has not mentioned this exemption in your Form 16, it could be an administrative oversight. It's generally the responsibility of the employer to correctly calculate and mention such exemptions in the Form 16.

In case your Form 16 does not include the correct exemption for leave encashment and you are eligible for the exemption, you should contact your employer to rectify the Form 16
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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