1. The full amount
received by a retiring absorbed employee 'as the cash equivalent of the leave salary in
respect of the period of earned leave at his credit at the time of his retirement', under
sub-clause (i) of Section 10(10AA), Income Tax Act, 1961, calculated as per the
accepted norm adopted for calculating the Amount due for the Government service
period, will be eligible for full exemption, on the date of absorption,
in BSNL from DOT.
2. As per sub clause
(ii) of the Section 10(10AA) of Income Tax Act, 1961, subject to the exemption limit of Rs.
300,000/-,
amount calculated equivalent to leave salary drawn by the employee on or after
the date of absorption in BSNL (i.e., PSU Service) is taxable.
1.
Keeping
in view the above position,
,a) If BSNL absorbed employee already had 300 days standing to his credit
at the time of his retirement from Service i.e., his permanent absorption into BSNL, the entire amount of leave encashment is eligible for
full exemption under section
10(10AA) sub clause (i) of Income Tax Act,
1961, at the time of payment on superannuation /retirement etc. of the
employees.
(b) If an absorbed employee has less than 300 days standing to his credit
at the time of his retirement from Government Service i.e., his permanent absorption
into BSNL, leave encashment
amount for the balance period (not exceeding 300 days in total
as prescribed) subject to the exemption limit of Rs. 3,00,000/- will be
taxable
4. Taking into consideration the above
guidelines,
'a) The earned leave account of Government Service at their credit as
on the date of permanent
absorption into BSNL is to be calculated proportionately as per service records and to allow the full exemption upto 300
days on the date of superannuation/retirement
etc. as an employee of the Central Government under sub clause (i) of section 10(10AA) of Income Tax
Act, 1961.