Wednesday, April 22, 2009

COMMISSIONER V. CA (TAX)


Issue: Whether terminal leave pay is subject to income tax.

NO.

Ruling: TERMINAL LEAVE PAY received by a government official or employee is not subject to withholding income tax. In the exercise of sound personnel policy, the Government encourages unused leaves to be accumulated. The Government recognizes that retirement pay for public servants is less than generous, if not meager or scrimpy. Terminal payments are given thus not only at the same time but also for the same policy considerations governing retirement benefits. Not being part of the gross salary or income of a government official or employee but retirement benefit, terminal leave pay is not subject to income tax.


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