New Delhi, Jan 1 (IANS): Trade body Federation of Indian Export Organisations (FIEO) has sought to remove the anomaly in levying of tax on leave encashment for retiring non-government employees.

In its pre-Budget discussion with the Finance Ministry, FIEO has demanded that non-government employees should be treated at par with government employees with regard to tax on leave salary. It also demanded that the present cap of Rs 3 lakh should be removed.

Putting forward its demands, the trade body said that Section 10 (10AA (i) of the Income Tax Act provides complete exemption from income tax to central government or state government employees on any amount received as cash equivalent of leave salary in respect of earned leave at his credit at the time of retirement.

"However, Section 10 (10AA) (ii) provides an exemption to non-government employees for cash equivalent of leave salary only up to a maximum of Rs 3 lakh," FIEO said.

The trade body argued that the limit was fixed in 1998 and hence there was no basis for discrimination between non-government employees and government employees.

It noted that in many cases, non-government employees receive less amount as cash equivalent of leave salary as compared to government employees.

"For uniformity and simplicity, any cash equivalent of leave salary should be fully exempt from income tax without any limit as has been the case for Central government/state government employees," FIEO said.