Taxability of Retirement Benifits under Income from Salary

Leave Encashment
No.	Section	Particulars	Taxability/Exemption
1	10(10AA)	Encashment of unutilized earned leave at the time of retirement of Government employees	Fully Exempt

Exemptions and Deductions from Salary Income

A.	Allowances
No.	Section	Particulars	Taxability/Exemption
1	10(13A)read with Rule 2A	House rent allowance	Least of the following is exempt: a) Actual HRA Received b) 40% of Salary (50%, if house situated in Mumbai, Calcutta, Delhi or Chennai) c) Rent paid minus 10% of salary * Salary = Basic + DA (if part of retirement benefit) + Turnover based Commission Note: i. Fully taxable, if HRA is received by an employee who is living in his own house or if he does not pay any rent.i.e.house is self occupied. ii. It is mandatory for employee to report PAN of the landlord to the employer if rent paid is more than Rs. 1,00,000 [Circular No. 08 /2013 dated 10-10-2013].

Defination of Salary as Per Income Tax Act

Salary  include:

a) Wages

b) Annuity

c) Pension

d) Gratuity

e) Fees, Commission, Perquisites, Profits in lieu of or in addition to Salary or Wages

f) Advance of Salary

g) Leave Encashment