Income From Salaries Retirement Notes

Hello Dear Students, today’s topic is an Income From Salaries Retirement Notes .which is in that we will tell you after retirement what an employee get? so let’s start first of all.

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Income From Salaries Retirement Notes “, in today’s post, we are Income From Salaries Retirement Notes sharing the Income From Salaries Retirement Notes with you. In such a situation, we hope that this Rules of Noun will be helpful for their preparation. Friends, you can Download these notes down through the Download button.

Income From Salaries Retirement Notes
Income From Salaries Retirement Notes

Definition of Retirement – Income From Salaries Retirement Notes

When an employee retires from services or leaves a job and joins the other or he is retrenched, he receives some special payments from the employer.

Gratuity-                  [sec.10(10)(i)]     Any death-cum-retirement gratuity received by all categories of Government employees or employees of a local authority is exempt from income tax in full. Or Non – Government employees covered by the payment of Gratuity Act, 1972. [sec.10(10)(i)]

A. Employees covered by the payment of gratuity act–   The payment of gratuity act applies to those employees who are working in any establishment, factory, mine, oilfield, plantation, port, railway or shop to do any skilled.

Exempted Amount – Least of the following shall be exempt:-

  1. 15 days’salary (7 days in the case of employees of a seasonal establishment ) based on salary last drawn for every completed year of service and part thereof six months; or
  2. ₹ 10,00,000; Government notification
  3. Gratuity actually received.

Meaning of salary-

Monthly basic salary last draw ;


Dearness allowance ( whether as per terms of employment or not )

The formula of computation of 15 days’ salary-Last month salary * 15/26

B. In the case of Non- Government employees not covered by the payment of Gratuity Act, 1972 [sec.10(10)(iii)-

Dependents on his death are exempt up to the least of the following amounts:-

  1.  One -half month average salary for each year of completed service, or
  2. ₹ 10,00,000; by government notification ,
  3. The actual amount of gratuity received.

In other important words for completed year – In order to compute the number of completed years of service, only the complete years will be taken into account and the service for a part of the year will be ignored.

Average Salary-(Income From Salaries Retirement Notes)

  1. Basic salary
  2. Dearness allowance, if it is given as per terms of employment
  3. Commission based upon a fixed percentage of turnover achieved by the employee.


The pension is received by an employee (Government or Non-government ) after retirement, it is chargeable under the head ‘Salaries’.

Computation of Pension is exempt from tax subject to the following limits –

income tax
income tax

Earned Leave Salary

A. Encashment during service In this statement, when an employee receives payment in respect of any leave, not availed by him, On retirement or resignation, it will be exempt to the following extent-:

1. Government Employees –  Any Payment received by an employee of the Central Government Or  Stae Government as the cash equivalent to the earned leave at his credit at the time of his retirement. so it is fully exempt.

2.Non- Government Employeesit is exempt to the extent of the least of the following amounts-

(i) Maximum of 10 months’ salary on the basis of the average salary drawn by the employee over 10 months immediately preceding his retirement.

(ii) Amount of salary on the basis of average salary for the approved period for which earned leave has not been availed.

(iii) Maximum limit prescribed by the Central Government ₹ 3,00,000.

(iv) Amount actually received.

Approved Period of earned leave

Earned leave entitlement cannot exceed 30 days for every year of actual service with the employer who is paying the cash equivalent to earned leave.

Monthly of salary 

  1. Basic salary
  2. Dearness allowance, if given under the terms of employment
  3. Commission based upon the fixed percentage of turnover achieved by the employer.

Retirement Compensation

[Sec.10(10B)]  Any Compensation received by a workman under the Industrial Disputes Act, 1947, at the time of retrenchment is exempt from tax to the extent of the least of the following amount:-

  1. An amount calculated in accordance with Section 25F(b) of the Industrial Disputes Act, 1947.
  2. Amount notified by the Central Government ₹ 5,00,000.
  3. Actual Amount of compensation received.

Meaning of Salary-

under the Industrial Disputes Act, for this purpose Salary or wages Mean All Remuneration Capable of being expressed in terms of money.

In Includes-:

  1. such allowances Including dearness allowance as the workman is entitled to,
  2. the Value of any House Accommodation or supply of light water medical attend once or other amenity or services or any concessional supply of foodgrains or other articles;
  3. any travel concession

But does not include-:

  1. any bonus
  2. any contribution paid or payable by the employer to any pension fund or provident fund for the benefit of the workman.
  3. any gratuity payable on the termination of his service.

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