The Court disposed of the writ petition with liberty to the petitioners to approach the government for relief

The Kerala High Court has held that the employees cannot claim income tax exemption in the absence of government notification fixing the limit of income for earned leave salary. Balan Panicker Ramesh Kumar, one of the petitioners have sought the direction of the respondent department to review the income limit for tax purposes on earned leave salary under Section 10AA(ii) of the Income Tax Act, 1961, with retrospective effect. After 2002, there had been no revision of the income limit for exemption on encashment of earned leave salary under Section 10 (10AA)(ii) of the Income Tax Act. The petitioners are retired employees of different public sector undertakings and scheduled banks. All the petitioners retired from service before April 1, 2023. It was stated that in connected cases the Court after referring to Section (10AA)(ii) of the Income Tax held that “4. It is the prerogative of the Government to fix the limit of income of encashment of earned leave salary for exemption from payment of income tax. Unless the Government issues the notification fixing the limit of income for earned leave salary, an employee cannot claim exemption from payment of income tax on encashment of earned leave up to 300 days. The last notification was issued on 31.05.2002, and the Government did not thereafter issue a notification despite there having been three pay revisions.  The latest notification is only in 2023, wherein the upper limit has been fixed as Rs.25 lakhs, taking the highest salary of the cabinet secretary, i.e., Rs.2.5 lakhs per month.” A single bench of Justice Murali Purushothaman has observed that the last notification was issued on May 31, 2002, and the government did not thereafter issue a notification despite there having been three pay revisions. The latest notification is only in 2023, after which the upper limit has been fixed at Rs. 25 lakhs, taking the highest salary of the cabinet secretary, i.e., Rs. 2.5 lakhs per month. The Court disposed of the writ petition with liberty to the petitioners to approach the government for the reliefs sought, and the government may decide on their representations.