I retired on 25/10/2017 completing 58 years of service from a private job of service length of 8 years 7 months in the present company. My LEAVE ENCASHMENT amount is 3,43,983/-. As I understand leave encashment is exempted on resignation/retirement . But company official included my this total income to an income from salary in calculating TAX LIABILITY saying that this exemption has certain restriction. But they are not able to explain or substantiate it. Please let me know the exact status? How much amount is TAXABLE/EXEMPTED? What are the relevant rule about this?
In your case, the exemption is to be limited to the least of following:
(a) Cash equivalent of unutilized earned leave (earned leave entitlement cannot exceed 30 days for every year of actual service)
(b) 10 months average salary
(c) Leave encashment actually received. This is further subject to a limit of Rs 3,00,000 for retirements after 02.04.1998.