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As per Section 10 (10AA) of the Income-Tax Act, cash equivalent of leave salary received at the time of retirement, whether on superannuation or otherwise, is wholly exempt in the case of Central or State Government employees. However, for other employees, the exemption of leave salary received at the time of retirement, whether on superannuation or otherwise, is exempt subject to certain conditions and limits indicated therein.

The amount of leave salary exempted is limited to Rs 3 lakh where the employee retires after April 1, 1998. This amount was fixed vide Notification No. S.O. 588 (E) of May 31, 2002, issued by the CBDT.

Thus, the last revision in the amount exempted from tax was notified more than six years ago. Considering the unprecedented inflation during this long period, which has seriously affected the working class, it is necessary to raise the exempted amount suitably. Raising the exempted amount to at least Rs 6 lakh may be considered by the authorities.

K. K. Sharma e-mail

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