Gratuity
This query is : Resolved
23 March 2011
Hi
Could you please explain me the treatment of Gratuity received during the year by employee for Tax computation purpose.
Could you please explain me the treatment of Gratuity received during the year by employee for Tax computation purpose.
CA Navin Jain
(Expert)
23 March 2011
Gratuity received upto Rs. 1000000 is exempt
CA Namrata Dedhia
(Expert)
23 March 2011
Gratuity recd by Govt employees - fully exempt
For others -
If employee is covered by Payment of Gratuity Act, least of the following is exempt -
1. 10 lakhs,
2. actual gratuity recd, or
3. 15/26*last drawn salary*completed yrs of service
salary here means basic + dearness allowance
completed yrs of service includes part of the yr in excess of 6 months
If employee is NOT covered by Payment of Gratuity Act, least of the following is exempt -
1. 10 lakhs,
2. actual gratuity recd, or
3. 1/2*average salary*completed yrs of service
average salary means average of last ten months' salary immediately before month of retirement
salary here means basic + dearness allowance in terms of employment + commission expressed as a % of turnover achieved by the employee
completed yrs of service DOES NOT include part of the yr in excess of 6 months
For others -
If employee is covered by Payment of Gratuity Act, least of the following is exempt -
1. 10 lakhs,
2. actual gratuity recd, or
3. 15/26*last drawn salary*completed yrs of service
salary here means basic + dearness allowance
completed yrs of service includes part of the yr in excess of 6 months
If employee is NOT covered by Payment of Gratuity Act, least of the following is exempt -
1. 10 lakhs,
2. actual gratuity recd, or
3. 1/2*average salary*completed yrs of service
average salary means average of last ten months' salary immediately before month of retirement
salary here means basic + dearness allowance in terms of employment + commission expressed as a % of turnover achieved by the employee
completed yrs of service DOES NOT include part of the yr in excess of 6 months
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