What’s at Stake
The Kerala High Court has dealt a significant blow to employees’ hopes of getting tax exemption on earned leave salary encashment, ruling that the government has the sole authority to fix the income limit for exemption. Read on to find out more!
In a recent judgment, the Kerala High Court has ruled that it is the prerogative of the government to fix the limit of income from the encashment of earned leave salary for the purposes of exemption from payment of income tax. This decision has sent shockwaves through the employee community, who had been hoping to get tax exemption on their earned leave salary encashment.
The Court’s Ruling
The court’s ruling came in response to a writ petition filed by an employee who had challenged a demand notice issued by the Income Tax Department, claiming that the income from the encashment of his earned leave salary was not exempt from tax. The employee had argued that the limit of income from earned leave salary for tax exemption was not specified in the Income Tax Act and therefore, he was entitled to claim exemption.
However, the Kerala High Court disagreed with the employee’s contention and held that unless the government issues a notification fixing the limit of income for earned leave salary, an employee cannot claim exemption from payment of income tax. The court relied on Section 10(4) of the Income Tax Act, which provides that an employee is entitled to exemption from payment of income tax on any sum received as leave encashment if such sum does not exceed a specified limit.
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Implications for Employees
This ruling has significant implications for employees who had been hoping to get tax exemption on their earned leave salary encashment. With this decision, employees will now have to pay taxes on their earned leave salary encashment unless and until the government notifies a specific limit for tax exemption.
The ruling has also raised questions about why the government has not specified a limit for tax exemption on earned leave salary encashment despite several demands from employees and trade unions. Many employees had been hoping that the government would specify a reasonable limit for tax exemption to ease their financial burden.
What’s Next?
The Kerala High Court’s decision has also sparked concerns about the impact it will have on employees who have already received or will receive earned leave salary encashment in future. Will they be forced to pay taxes on their hard-earned benefits? The answer lies with the government, which needs to take immediate action to clarify and specify a limit for tax exemption on earned leave salary encashment.
In conclusion, the Kerala High Court’s ruling has dealt a significant blow to employees’ hopes of getting tax exemption on earned leave salary encashment. While it is up to the government to notify a specific limit for tax exemption, employees are left wondering what this means for their future earnings. Will they be forced to pay taxes on their hard-earned benefits? Only time will tell.