Financial Year is the year in which the income is earned or say the year of which income-related.

Assessment Year is the year following the financial year in which you have to evaluate the previous year’s income and pay taxes on it.

For example, if the financial year is from 1 April 2020 to 31 March 2021, then it is known as FY 2020-21. The assessment year for this period would begin after the financial year ends – that is from 1 April 2021 to 31 March 2022. Hence, the assessment year would be AY 2022-22.

Resignation is also treated as retirement and section 10(10AA) provides certain exemptions from the amount of leave encashment. This section applies equally to a case of voluntary retirement on account of resignation.

In the following manner it will be exempted:

Resignation by Government Employee:

The full amount of leave encashment is exempted.

Resignation by other employees:

The least of below amount is exempted from income tax:

1. Leave encashment actually received
2. 10 months “average salary”
3. Cash equivalent of unveiled leave (Maximum 30 days leave X Completed Year of service).
4. Maximum Amount as specified by the Govt i.e. Rs. 3,00,000

Here

1. Salary” means “Basic + Dearness Allowance” including commission received if any based on a fixed percentage of turnover.
2. “Average Salary” means the average salary drawn by the employee during the period of 10 months immediately preceding his retirement.

One important thing is to be required to keep in mind that in the above case Maximum limit of Rs 300000 is cumulative means if the employee has availed the exemption of leave encashment received from any one or more employers, then the limit of Rs. 3,00,000 specified above shall be reduced by the amount of exemption availed earlier.

Both are Accounting terms used in business transactions.

Let’s discuss the Debit note First.

1. A debit note is issued from a buyer to a seller.
2. Issued when the buyer receives incorrect or damaged goods or services.
3. issued when the buyer cancels the purchase orders.
4. Simply the debit note is issued at the time of Purchases Return
5. When the invoice is overbilled or billed with an Incorrect amount
6. And for the above reasons, the buyer requests to return funds from the seller.
7. A debit note is issued before a credit note.
8. It works as purchases return.

Example of debit note:

Ram is the purchaser, and Shyam the seller or supplier. Now see the sequence of events leading to the issuance of a debit note.

1. Ram purchases goods worth Rs. 1000 from Shyam.
2. Ram receives the goods and the final invoice but receives some damaged goods.
3. Ram inform Shyam about the damaged goods and ask for returning the goods as is.
4. Ram raises a debit note against Shyam, mentioning the original purchase, the value of the damaged goods, and the reason behind the return.
5. On receipt of the debit note, Shyam issues an appropriate credit note.

As per section 34(3) of the Goods and Services Tax Act, “Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to be less than the taxable value or tax payable in respect of such supply, the registered person, who has supplied such goods or services or both, shall issue to the recipient a debit note containing such particulars as may be prescribed”.

Now, Lets understand the Credit Note

1. A Credit note is issued from a seller to buyer.
2. Issued when the Seller buyer receives incorrect or damaged goods or services.
3. issued when the buyer cancels the purchase orders and the amount has already been received, buyer.
4. Simply the Credit note is issued at the time of Sales Return
5. When the invoice is incorrect.
6. When some discount has to be given.
7. When buyer denied paying some amount of invoice.
8. And for the above reasons, the buyer requests to return funds from the seller.

Sec 34 of GST Act defined the credit note as below.

“Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.”