Exemption of gratuity in case of govt employees

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This discussion clarifies the tax exemption for gratuity received by government and public sector undertaking (PSU) employees. While government employees are fully exempt under Section 10(10)(i), employees of PSUs like LIC fall under different sections. For LIC employees, the gratuity exemption is currently capped at £20 lakh, meaning any amount exceeding this limit is subject to tax.

Pallavi Agrawal

Pallavi Agrawal (Querist)

26 July 2025 Is according to section 10(10)(i) gratuity to govt employees fully exempt from tax?

My client got retired from LIC which is a central govt undertaking. As per his form 16, he received gratuity of Rs. 40 lakhs however only he has been exemption of Rs. 20 lakhs only. So can I claim full exemption of Rs. 40 lakhs in ITR or even for govt employees the gratuity is exempt upto Rs. 20 lakhs

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

27 July 2025 Employees of public sector undertakings (PSUs) like LIC (Life Insurance Corporation of India) are not classified as government employees for the purposes of Section 10(10)(i). Instead, their gratuity exemption falls under Section 10(10)(ii) or Section 10(10)(iii), depending on the applicability of the Payment of Gratuity Act, 1972. For LIC and other PSU employees, the current exemption limit is Rs. 20 lakh. Any gratuity received above this limit is taxable.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)

25 September 2025 Good luck...

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