Gratuity

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Raghav Jha (Querist)
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18 December 2009 Respected Sir, Kindly provide me the details for calculation of Gratuity if the employer is registered under Gratuity Act as well as if he is not registered under Gratuity Act. Kindly provide me details by a example if possible.

ANIL JANGID

ANIL JANGID (Expert)
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18 December 2009 gratuity is payable on 5 yr complition of service of a employee.
GRATUITY CALCULATION.
BASIC SALARY*15DAYS*NO OF YR./26

Murtaza I Bhagat

Murtaza I Bhagat (Expert)
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18 December 2009 P8. Mr. Hari retires on 15th October2008, after serving 30 years and 7 months. He gets Rs.3,80,000
as gratuity. His salary details are given below:
FY 2008-09 Salary Rs.16,000 pm D.A. 50% of salary. 40% forms part of retirement benefits.
FY 2007-08 Salary Rs.15,000 pm D.A. 50% of salary. 40% forms part of retirement benefits
Determine his gross salary in the following cases:
(i) He retires from government service
(ii) He retires from seasonal factory in a private sector, covered under Payment of Gratuity
Act, 1972.
(iii) He retires from non-seasonal factory, covered by Payment of Gratuity Act, 1972
(iv) He retires from private sector, not covered by payment of Gratuity Act
Computation:
(i) The amount of gratuity received as a Government employee is fully exempt from tax u/s
10(10)(i)
(ii) As an employee of a seasonal factory, in a private sector, covered under the Payment of
Gratuity Act, 1972
Computation of Taxable Gratuity
Particulars Rs Rs
Amount received as Gratuity 3,80,000
Less: Exemption u/s 10(10)(ii) Least of the followings:
(i) Actual amount received 3,80,000
(ii) 7/26 x Last drawn salary x No. of years of completed service
or part thereof in excess of 6 months [31 Ã— 7/26 Ã— 24,000] 2,00,308
(iii) Maximum Limit 3,50,000 2,00,308
Taxable Gratuity 1,79,692
(iii) As an employee of a non-seasonal factory, covered by Payment of Gratuity Act, 1972
Tax Supplement 5
Computation of Taxable Gratuity
Particulars Rs Rs
Amount received as Gratuity 3,80,000
Less: Exemption u/s 10(10)(ii) Least of the followings:
(i) Actual amount received 3,80,000
(ii) 15/26 Ã— Last drawn salary Ã— No. of years of completed 4,29,231
service or part thereof in excess of 6 months
[15/26 Ã— 31 Ã— 24,000]
(iii) Maximum Limit 3,50,000 3,50,000
Taxable Gratuity 30,000
Note : Salary = Basic Pay + Dearness Allowance
In case of seasonal employment, instead of 15 days, 7 days shall be considered.
(iv) As an employee of a private sector, not covered by Payment of Gratuity Act,1972
Computation of Taxable Gratuity
Particulars Rs Rs
Amount received as Gratuity 3,80,000
Less: Exemption u/s 10(10)(iii) Least of the followings:
(i) Actual amount received 3,80,000
(ii) 1/2 Ã— Average salaryÃ—No. of fully completed years of service
[Â½ Ã— 18,720 Ã— 30] 2,80,800
(iii) Maximum Limit 3,50,000 3,50,000
Taxable Gratuity 99,200
Note: Salary = 10 months average salary preceeding the month of retirement.
= Basic Pay + Dearness Allowance considered for retirement benefits + commission
(if received as a fixed percentage on turnover)
Salary for the months Decemberâ€™06 till September â€™07 shall have to be considered.

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