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No tax on leave encashment for govt staff
May, 18th 2015

I am serving in Punjab State Power Corporation Limited (PSPCL), a state government corporation, and am due to retire shortly. On retirement, I’ll receive 10-month leave encashment amount. I am told by the accounts wing that they will treat the amount above Rs 3 lakh as taxable and applicable tax will be deducted. I understand this amount is fully exempt under Section 10, but the accounts department says I should claim tax refund from the I-T Department. A tax amount of more than Rs 3.50 lakh would be deducted.I need money on retirement to invest and want to avoid the long process of tax deduction, then filing return in July, 2016 (as I will retire in November, 2015) and getting refund. How should I convince my employer for not making tax deduction? —Rajinder Kumar

Section 10AA of the Income-tax Act, 1961 (The Act) provides that in case of an employee other than that of Central Government and of State Government, leave encashment received by an employee at the time of his retirement on superannuation shall be exempt from income tax provided the amount so received does not exceed 10 months leave subject to a maximum amount of Rs 3 lakh. The amount of leave encashment received at the time of retirement is exempt in full in the case of Central Government and State Government employees. Punjab State Power Corporation Limited although a State Government Corporation is not treated as a State Government entity. Therefore, the accounts wing of the company is correct in deducting tax at source in respect of the leave encashment in excess of Rs 3 lakh. I do not think that any of the employees of the company/ corporation will be able to get the exemption of the entire amount of leave encashment.

I am a senior citizen having taxable income from pension and interest income from FDs after making savings under Section 80C. Can I submit 15H form to the bank and pay income tax due as self assessment before filing of income-tax return? — Shiv Narain

An assessee who is a senior citizen can furnish form 15H to the person responsible for paying any income in the nature of interest in case his estimated total income for the previous year in which such interest income is to be included in computing the total income, would be nil. As you would be having a taxable income, it is not possible for you to file form 15H with the bank.

I am salaried class having gross annual income of around Rs 27 lakh from all sources (salary, bank interest and house rent etc.). Am I required to deposit advance tax? If yes, then please guide me how to calculate it every quarter? — Bhaskar

A person having income from salary, bank interest and house rent, etc. is required to pay advance tax in case tax payable by him exceeds Rs 10,000. In case TDS from the income earned by him is not likely to cover the tax payable on his total income for a particular assessment year, tax will have to be computed on the total income after allowing deduction allowable under Chapter VI-A (Section 80C etc.) of the Act. Out of tax so computed, tax deductible at source shall be subtracted. The balance amount would be payable as advance tax in the previous year relevant to an assessment year. Advance tax would be payable in three instalments i.e. on 15th September, 15th December and 15th March of the financial year in respect of which tax is required to be paid. The first and second instalments are of 30% each and the balance instalment is 40% of the total tax payable.

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