Case Law Details
R. Jayakumar Vs Union of India (Kerala High Court)
In a recent ruling, the Kerala High Court addressed the case of R. Jayakumar vs Union of India, wherein retired employees sought a revision of the income limit for tax exemption on earned leave salary with retrospective effect. The petitioners, all of whom retired before April 1, 2023, argued that the income limit under Section 10(10AA)(ii) of the Income Tax Act, 1961, had not been revised since 2002, despite multiple pay revisions.
Background: The petitioners, retired employees of the 5th respondent, filed writ petitions seeking a directive for the respondent authorities to review and revise the income limit for tax exemption on earned leave salary. They contended that the limit, set at Rs. 3 lakhs in 2002, was outdated and did not reflect the subsequent pay revisions.
Legal Provisions: Section 10(10AA)(ii) of the Income Tax Act, 1961, deals with the tax exemption on earned leave salary for non-government employees. It allows an exemption for earned leave up to ten months, calculated based on the average salary drawn during the ten months preceding retirement. The income limit for this exemption is subject to government notification.
Petitioners’ Argument: The petitioners argued that the income limit for tax exemption on earned leave salary had not been revised since 2002, despite three pay revisions during this period. They highlighted that the latest notification in 2023 set the limit at Rs. 25 lakhs, reflecting the highest salary of a cabinet secretary. They asserted that the government should have periodically revised the limit to account for the pay revisions and inflation.
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