This write-up makes a note of the commonly known deductions available but at times over sighted to be claimed by taxpayers.
In this context, it may be worthwhile to draw attention to a very significant non-taxable payment by employer; but both employer and employee unwittingly or otherwise fail to exclude it. That is the cash payment known as ‘leave encashment’ and specifically provided in section 10 (10AA) of the IT Act as income not includible in taxable income.
If scouted around, instances may be found not wanting in which employer, particularly also in key sectors such as, the IT Sector, not cared to know hence failed to take into account the said tax exemption ab initio for the purpose of tax withholding (TDS); besides, failing even to clearly make a specific mention of such payment on the face of Form 16. . So much so, exemption omitted to be claimed by employees in the tax returns as well. That is observed to happen even if employee ‘s tax return has been prepared by a practising professional e.g. a CA in tax practice.
For anyone of them to know the scope of the subject exemption , besides closely reading and understanding the provision, also need to keep in focus inter alia, - (A) the legislative history of the changes made as discussed and elucidated in decided court cases (e.g. (1998) 98 TAXMAN 138 (BOM.), in re. D.P. Malhotra); and (B) more importantly, the helpful underlying implications of the first Proviso to the sub-clause (i) thereof.