Amount received by way of encashment of leave can be treated as salary for the purposes of relief u/s 89(1) of Income Tax Act, 1961. - Income Tax - 1017/CBDT

INSTRUCTION NO. 1017/CBDT Dated : October 7, 1976 Section(s) Referred: 89(1) Statute: Income - Tax Act, 1961 Representations have been received by the Board seeking clarification whether the amount received by way of encashment of leave can be treated as salary for the purposes of relief u/s 89(1) of the Income-tax Act, 1961. 2. Relief u/s 89(1) of the Act is admissible to an assessee who receives a portion of salary either in arrears or in advance or if he receives in any financial year salary for more than 12 months. The amount received by an employee by way of encashment of accumulated leave cannot be said to fall within the ambit of section 89(1) of the Act. The amount received by an employee in such cases is as a result of a purely voluntary act on his part of surrendering leave to his credit for money's worth. The amount received by him, therefore, accrues in the year in which he exercises the option to receive monetary payment in lieu of accumulated leave. 3. It has been decided on careful consideration of all the facts that money received on encashment of accumulated leave will not qualify for relief u/s 89(1) of the Act.