Leave encashment exemption

[Former Member]

Hi Friends,

We have a case where employee resigned the company within 8months of his service. He joined in May'2014 and resigned in December, His last working day is 31.12.2014.

In this case, In SAP , his average monthly salary will be cumulated only for 8 months.. Can any one help to understand how does the leave encashment exemption works in this case?

Currently, when I ran his December payroll, there is no leave encashment exemption triggered for this employee..

Thanks,

Geetika

[Former Member]

Hi Praneeth & Venkatesh,

Thanks for your advice.

Our configuration is working fine for employees who have been in the organisation for more than 10 months. The amount encashed is exempted from tax as per the limits prescribed by LAW.

The question is if employees works in the company for 8 months and he gets leave encashment amount, should this amount be exempted from tax as per the law?

If I key in 10months average salary in IT0015, then leave encashment amount is exempted from tax else, the encashed amount is showing as taxable. But he is in the company only for 8 months, I dont see , it is logical to input 10months aver.salary in IT0015.

Can you please advise further?

Thanks,

Geetika

[venkateshorusu]

Better you go through below link.

IndiaTaxes.com - Leave salary, leaves per annum, Nature of leave encashment, Taxability, Employee st...

Regards

Venkatesh

[Former Member]

Hi Geeta,

Rule is saying that Employee has to be with Employer atleast 240 days during a calender year. check once is any provision or standing orders/ agreement of contract b/w the worker/employee to employer in their HR policy book.

check with the client for any clauses or rules in their agreement are there, if it is there do accordingly. otherwise ask client only what to do (through writings by mail).

Hope these helps to solve your issue.

Regards,

Praneeth kumar

[Former Member]

Hi Geeta,

Is your problem solved ? what you done for this issue, is employee eligible for Leave encashment exemption ?

[venkateshorusu]

When you wanted get leave encashment exemption you have to configure table V_T7INT9 where you have to define tax code and limit for the leave encashment wage type then you will get exemption for the same.

Regards

Venkatesh

[Former Member]

Hi Geetika,

Can you specify how you are doing leave encashment for this employee ? means what is ur configuration in the system.

just have a look these below documents, you get some idea

Regards,

Praneeth kumar