Taxman capped LIC retiree's leave pay exemption at Rs 3L; ITAT allows Rs 9.04L
An LIC retiree successfully challenged an income tax notice regarding the tax exemption limit on her leave encashment. The ITAT ruled in her favor after she faced a tax demand due to a misunderstanding of non-government employee tax rules.
Why it matters
This case highlights the importance of understanding specific tax exemptions for non-government employees and the potential for legal recourse through the ITAT.
How much of your leave encashment is exempt from income tax? That depends on whether you are a government employee or a private sector employee. The limit for private sector employees was recently raised to Rs 25 lakh.In one case, a retired woman faced a tax notice on her leave encashment, with the Income Tax Department allowing only part of it for exemption. Read on to know why she won relief from ITAT.What the case is aboutA woman retired from Life Insurance Corporation of India (LIC) on June 30, 2020 after more than 30 years of service. She received Rs 9.04 lakh as leave encashment, in addition to her other retirement benefits.
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