Gratuity Are Taxable or Not

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dev (Querist)
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12 August 2010 Are Gratuaity taxable or non taxable in employes hand.
if company paid gratuaity to employes than gratuity amount taxable and non taxable for tds purpose

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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12 August 2010 Right now, upto 10 Lac , its exempt.

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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12 August 2010 Tax treatment for gratuity
The amount of gratuity received by a person is taxed as salary income under the head 'income from salaries' on the income tax return. If you are a government employee, the gratuity amount paid is completely tax free. For non-government employees too there are tax exemptions equal to the lower of:
• Amount of gratuity paid or
• For every completed year of employment - Rs 3.50L (This is the current limit. It may be increased to Rs 10L in the near future)

Note that this limit is a maximum exemption for all your years of service. It applies to all the amounts of gratuity you will receive in your entire career from all your employers.

So, if you receive gratuity three times in your life and you exhaust the above limit within the first two times you receive gratuity, then the third time you are paid gratuity, it will be completely taxed according to your current tax slab rates

CMA. Subhash Kumar Jha

CMA. Subhash Kumar Jha (Expert)
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12 August 2010 Agreed with all the above explanations by Mr Bansal.

Though, "Payment of Gratuity (Amendment) Act, 2010 (No. 15 of 2010), dated 17-5-2010" has already come in picture, the actual applicable date would be when this bill will be actually notified.

Thanks for the clarification.

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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12 August 2010 Agreed, Rs. 10 lac increased as now.
I cut paste it from my old collection.

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