Problems on Leave encashment

1. Mr. Narasimha (resident) was a manager in a Private Company. He sought pre mature
retirement from service on 1st November 2023 after completing 25 years of service. His salary
for 10 months preceding retirement was 36,900. He had seven months leave to his credit on the
basis of 30 days per year which was approved and he was paid Rs 27,300 as salary. Compute the
amount of encashment exempt from tax for P.Y. 2023-24, if his last drawn salary is Rs 3,900.

2. Mr. Kumar (resident) resigned from his service from a public company on 30th November
2023 after completing 24 years and 10 months of service. During his service he was allowed to
get 45 days of earned leave for every completed year of service. During his service he had
availed 10 months leave and had encashed 6 months leave. On resignation he was paid leave
salary of Rs 2,20,000 for his credit of 20 months earned leave. His average salary during the 10
months preceding to the date of his resignation was 11,000. Compute his taxable leave salary for
the assessment year 2024-25.

3. Mr. Suresh (resident) retired from ABC Ltd. On 1-11-2023 after serving the company for 25
years and 9 months. At the time of retirement his basic pay was 20,000 p.m. and DA of rs 800
p.m. [which is treated as salary for the purpose of all retirement benefits] but it was rs 18,000 per
month basic and 200 p.m DA upto 31-7-2023. He is entitled for 45 days of leave per year of
service and has availed 55 days leave and encashed 20 days of leave throughout his service and
received a leave salary 7,28,000. Compute taxable part of leave salary for the A.Y. 2024-25.

4. Mr. Nishanth (resident) was employed in a company. He retired from service on 1-1-2024
after completing 30 years of service. From 01-07-2022, his pay scale was 8,000 - 200 - 10,000 -
300 - 13,000 and he was getting DA @ 20% of his pay under the terms of employment. He had 7
months earned leave to his credit (on the basis of 30 days per year), which was approved. Hence,
he was paid 57,400 as salary and 11,480 as DA Compute the amount taxable regarding
encashment of earned leave for the Assessment Year 2024-25.
5. Mr. Mohan is a non-government employee who receives Rs 28,000 as earned leave salary at
the time of retirement on 10th March, 2024. On the basis of the following information. Determine
the amount of taxable earned leave salary.
a) Basic pay 4,000 p.m. since 1-1-2023
b) Duration of services 16 years, 4 months.
c) Leave at the credit of employee at the time of retirement is 7 months.
d) Entitlement of leave salary 45 days for every completed year of service.
e) Leave availed while in service is 17 months.
What benefit he would have got if he were to be government employee?

6. Sri. Sai Bindu, retires on 31.10.2023, after 20 years and received Rs 48,000 as leave
encashment for 12 months. His employer allows him 1-1/2 month of leave for every one year of
service. He has already encashed leave for 18 months. His salary for 2023-24 was & 3,000 and
from 1.4.2023 it was raised to 4,000 p.m. Compute Taxable amount of Leave Salary for the
Assessment Year 2024-25.

7. Sri. Narasimha was employed by PQR Ltd. up to 15.3.2024. At the time of leaving PQR Ltd.
he was paid Rs 3,50,000 as leave salary, out of which 57,000 was exempt from tax. He joined
ABC Ltd. and received 7,59,000 as leave salary at the time of retirement on 31.12.2023.
Determine the amount of taxable leave salary from the following: (Ignore Alternative Tax
Regime under Section 115BAC)
1. Salary at the time of retirement & 23,000 p.m.
2. Average salary received during 10 months ending on 31.12.2023 i.e., from 1.3.2023 to
31.7.2023 22,600 p.m. & from 1.8.2023 to 31.12.2023 22,900 p.m.
3. Duration of service 24¾ years.
4. Leave entitlement for every year of service 1½.
5. Leave availed while in service 3 months.

8. Smt. Saraswathi is the sales manager of Coptex Ltd. She is paid salary of Rs 20,000 p.m. from
01.04.2016. DA is allowed @ 4,000 p.m. but 50% of it forms part of salary for superannuation
benefitis. She retires on 31.01.2024. She is also paid 2% commission on sales. Sales affected by
her during this period amount to Rs 5,00,000. She is entitled for 1 ½ month earned leave for
every year of completed service, ignoring part of the year. She retires after 20 years and 7
months. She has availed 10 months leave and got encashment of 8 months leave while in service.
The leave encashment is allowed @ 20,000 p.m. Compute the amount of exempt regarding
encashment of earned leave for the Assessment Year 2024-25.

Problems on Gratuity

1. Mr. Sumanth (resident) is employed at a salary of 6,200 per month. He is also getting DA of
2,800 per month. He receives 5,000 as bonus. On 30.5.2023, he retired from his service. He had
service of 29 years and 5 months. He received 2,00,000 as gratuity under the Payment of
Gratuity Act.
Compute his taxable gratuity for the Assessment Year 2024-25.

2. Sri. Narayan Ghosh, an employee of LMN Ltd. received 45,000 as Gratuity under Payment of
Gratuity Act. He retires on 10/11/2023 after rendering service of 30 years and 4 months and 27
days. At the time of retirement, his monthly salary was 2,340 inclusive of DA of 200 p.m. and
entertainment allowance 1,300 p.m. Calculate the amount of gratuity taxable for the A.Y. 2024-
25.

3. Sri. Ashim Patra is employed at a salary of 6,000 p.m., in a seasonal factory. Besides, he also
gets DA at 2,500 pm., and annual bonus 5,000. He retires on 30.9.2023. He gets 1,75,000
gratuity under Payment of Gratuity Act, 1972. He served for 30 years and 7 months. Compute
taxable amount of Gratuity for the A. Y. 2024-25.

4. Mrs. Mousumi Das (resident), an employee of SRM Ltd., retires from her service on 16th
January 2024 after serving for 36 years and 6 months and 1 day. She receives 97,000 as Gratuity
under the Gratuity Act 1972. At the time of retirement her Basic Salary was 2,300 p.m. and
Dearness Allowance was 400 p.m.
What amount of Gratuity will be taxable for the assessment year 2024-25?
5. Sri. Vinayaka, received 60,000 on his retirement on 30/09/2023 as gratuity from his employer
with whom he served for 29 years and 7 months. Compute taxable amount in each of the
following cases: If his salary during calendar year 2021 was 2,000 and during 2022 was 2,400
and it is due on 1st of every month. He had worked earlier with a company for 6 years and
received 92,000 as gratuity, which was fully exempted.
a. He is Govt. employee
b. He is working in a factory (covered under the Payment of Gratuity Act)
c. He is working in a commercial office at Delhi.

6. Mr. Anand Shankar (resident), retired from service in Mysore Minerals Ltd., on 31st
December 2023. In this company, he has put in 33 years and 9 months of service. On retirement,
the company paid him a gratuity of 3,25,000. His monthly salary at the time of retirement (since
1-10-2017) was 12,000, DA 3,000 and HRA 2,000. Find out the exempted amount of Gratuity if
he is: a) covered under the Payment of Gratuity Act 1972. b) Not covered under the Payment of
Gratuity Act 1972.

7. Mr. Ganguly (resident), a marketing manager in Kolkata, retired from XYZ Ltd. on Dec. 15,
2023 after 28 years and 8 months of service and receives 3,50,000 as death cum retirement
gratuity. His average basic salary for the preceding 10 months ended on 30 Nov. 2023 was
18,200 per month. Besides, he has received 1,000 per month as DA, 80% of which form part of
the salary for the purpose of computation of all retirement benefits and 6% commission on
turnover achieved by him. Total turnover achieved by him for 10 months ended on 30th Nov
2023 is 1,50,000. Assume he is not covered under Payments of Gratuity Act. Compute the
taxable gratuity for the A.Y. 2024-25.

8. Sri Veeresh (resident) retired on 31.3.2024 after serving in a company for 32 years and 10
months. He received 1,78,000 as gratuity. His average monthly salary in the immediately
preceding 10 months was 28,000. Compute his exempted and taxable gratuity for the A. Y.
2024-25. (Gratuity is not covered under Gratuity Act).
9. Mr. Arup Mukherjee (resident), a manager of a Limited Co., retires on 1-6-2023 after putting
40 years of continuous service. He received a gratuity of 1,00,000 in August 2023. His salary for
the year 2022-23 was 4,000 p.m. and 2023-24 6,000 p.m. Calculate his taxable gratuity for the
A.Y. 2024-25.

10. Sri. Eshwar Mullick, who is not covered by the Payment of Gratuity Act receives gratuity of
3,88,000 when he retires on 23/06/2023, after a service on 34 years 9 months and 23 days. His
last drawn emoluments are as follows: Basic Salary 25,000 p.m., DA 6,600 p.m. Servant
Allowance 600 p.m. Annual increment of Basic Salary 1,000 pm falls due on 1st January of
every year. Compute taxable amount of Gratuity for the A.Y. 2024-25.

11. Sri. Bhagavathi Prasad, Marketing Specialist is working with two companies - Aditri Co. &
Asmita Co. He retires from Aditri Co. on 30/11/2017 & receives 22,000 as gratuity out of which
20,000 is exempt. He also retires from Asmita Co. on 10/12/2023 after 28 years & 8 months of
service and receives 2,90,000 as gratuity. His average Basic salary drawn from Asmita Co. for
preceding 10 months ended on 30/11/2023 is 18,200. Besides, he has received 1,000 p.m. as DA
80% of which forms part of salary & 6% commission on turn over achieved by him. Total
turnover achieved by him during ten months ending on 30/11/2023 is 2,00,000. Find out taxable
amount of gratuity for the Assessment Year 2024-25.