Exemption of Gratuity, EL & Bonus.
This query is : Resolved
23 July 2017
Sir,
I have received a Gratuity Rs. 1,13,567/-, EL Rs. 19,011/- & Bonus Rs. 7,501/-.
My query as:-
1) Which of these amount are exempt in the Income Tax Act. 2) If exempt then; how much amount exempt and in which stream or 3) No exempt of any amount in which. 4) If no exempt then; this amount is part of basic salary for HRS calculation and 5) Which Form use for ITR in this regarding.
Thanks.
1) Which of these amount are exempt in the Income Tax Act. 2) If exempt then; how much amount exempt and in which stream or 3) No exempt of any amount in which. 4) If no exempt then; this amount is part of basic salary for HRS calculation and 5) Which Form use for ITR in this regarding.
Thanks.
23 July 2017
Sir,
Sorry for typing mistake "HRS
23 July 2017
Sir,
Sorry for typing mistake "HRS". Exact Word is "HRA"
Thanks
21 July 2024
Let's break down the taxation rules for Gratuity, Earned Leave (EL), and Bonus as per the Income Tax Act:
1. **Gratuity**: Gratuity received by an employee is exempt under Section 10(10) of the Income Tax Act based on the type of employer and eligibility criteria:
- For employees covered under the Payment of Gratuity Act, 1972 (including private sector employees):
- Exemption is provided up to the least of the following amounts:
- 15 days' salary based on the last drawn salary for each completed year of service.
- Rs. 20 lakhs (as per the recent amendment).
- Actual gratuity received.
- For employees not covered under the Gratuity Act:
- Exemption is limited to Rs. 10 lakhs.
- In your case, if the gratuity amount received is within the exempt limit (Rs. 20 lakhs for covered employees), it will be fully exempt from income tax.
2. **Earned Leave (EL)**: EL encashment is taxable as salary income. However, exemption up to a certain limit can be claimed under specific circumstances like government employees or based on employment agreements. Generally, EL encashment is taxable unless exempt under specific provisions or up to certain limits as per your employment contract or rules.
3. **Bonus**: Bonus received is fully taxable as salary income. There is no specific exemption provided under the Income Tax Act for bonus payments.
To summarize:
- **Gratuity**: Exempt up to specified limits under Section 10(10).
- **Earned Leave (EL)**: Generally taxable, subject to specific exemptions or limits under your employment terms.
- **Bonus**: Fully taxable as salary income.
Regarding your other queries:
4. If the amounts are not exempt, they will typically be considered part of your taxable salary income for the purpose of calculating HRA (House Rent Allowance) and other allowances.
5. You can file your Income Tax Return (ITR) using Form ITR-1 (Sahaj) if you have only salary income, income from other sources, and income from one house property. If you have more complex income sources or deductions, you may need to use other ITR forms like ITR-2 or ITR-3 as applicable.
It's recommended to consult with a tax advisor or chartered accountant who can provide personalized guidance based on your specific income sources, exemptions, and deductions to ensure accurate compliance with tax laws.
1. **Gratuity**: Gratuity received by an employee is exempt under Section 10(10) of the Income Tax Act based on the type of employer and eligibility criteria:
- For employees covered under the Payment of Gratuity Act, 1972 (including private sector employees):
- Exemption is provided up to the least of the following amounts:
- 15 days' salary based on the last drawn salary for each completed year of service.
- Rs. 20 lakhs (as per the recent amendment).
- Actual gratuity received.
- For employees not covered under the Gratuity Act:
- Exemption is limited to Rs. 10 lakhs.
- In your case, if the gratuity amount received is within the exempt limit (Rs. 20 lakhs for covered employees), it will be fully exempt from income tax.
2. **Earned Leave (EL)**: EL encashment is taxable as salary income. However, exemption up to a certain limit can be claimed under specific circumstances like government employees or based on employment agreements. Generally, EL encashment is taxable unless exempt under specific provisions or up to certain limits as per your employment contract or rules.
3. **Bonus**: Bonus received is fully taxable as salary income. There is no specific exemption provided under the Income Tax Act for bonus payments.
To summarize:
- **Gratuity**: Exempt up to specified limits under Section 10(10).
- **Earned Leave (EL)**: Generally taxable, subject to specific exemptions or limits under your employment terms.
- **Bonus**: Fully taxable as salary income.
Regarding your other queries:
4. If the amounts are not exempt, they will typically be considered part of your taxable salary income for the purpose of calculating HRA (House Rent Allowance) and other allowances.
5. You can file your Income Tax Return (ITR) using Form ITR-1 (Sahaj) if you have only salary income, income from other sources, and income from one house property. If you have more complex income sources or deductions, you may need to use other ITR forms like ITR-2 or ITR-3 as applicable.
It's recommended to consult with a tax advisor or chartered accountant who can provide personalized guidance based on your specific income sources, exemptions, and deductions to ensure accurate compliance with tax laws.
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