Gratuity received is taxable on what basis???

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madhur gupta (Querist)

07 July 2011 Hello Friendz
Plz help me in the following case:
Mr.x an employee was working for punjab electricity board which is state govt itself.thus gratuity received/receivable is fully exempt from tax.
but now in punjab this board has been converted into public limited co.in 2008-09
Mr.X retired in 2006 when it was state govt owned
but he received gratuity later in 2010 when it became company.
Now this received grat.will be taxable one or not
My view is that when services were rendered at that time it was state owned so should be fully exempt.
Plz help in this regard with decided case laws, if any
Further plz tell the limit of Rs.10 lac is on paid base or due base???
Thx

CS Bijoy

CS Bijoy (Expert)

08 July 2011 According to me Gratuity received by an employee on his retirement or resign is taxable under the head salary. In the case of government employees and employees of local authorities, the entire amount of death-cum-retirement gratuity is non-taxable.
Total of gratuity received by an employee, covered by the Gratuity Act 1972, from various employers in whole of service is exempt from tax to the extent of least of the following three amounts:
Fifteen days salary, based on the last drawn salary, for every completed year of service
Maximum Rs. 10,00,000/-
Gratuity actually received
Any gratuity not covered by the Gratuity Act 1972 is exempt from tax to the extent of least of the three amounts
The half month’s salary for each completed year of service. Average salary is to be calculated on the basis of the average salary drawn by the employee for last 10 months.
Maximum Rs.10,00,000/-
Gratuity actually received
Gratuity received in excess of the above amounts is taxable and is included in the gross salary for the purposes of taxation. You can claim this exempt from tax only once in life time. In case of death of the employee, the entire amount is non-taxable. However, if death occurs after the gratuity is due then excess of the above amounts is taxable.

madhur gupta

madhur gupta (Querist)

08 July 2011 Hello Friendz
Plz help me in the following case:
Mr.x an employee was working for punjab electricity board which is state govt itself.thus gratuity received/receivable is fully exempt from tax.
but now in punjab this board has been converted into public limited co.in 2008-09
Mr.X retired in 2006 when it was state govt owned
but he received gratuity later in 2010 when it became company.
Now this received grat.will be taxable one or not
My view is that when services were rendered at that time it was state owned so should be fully exempt.
Plz help in this regard with decided case laws, if any
Further plz tell the limit of Rs. 10 lac is on paid base or due base???
Thx

CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)

10 July 2011 THE GRATUITY WILL BE EXEMPT AND UR VIEWS ARE CORRECT
LIMIT OF 1000000 APPLIES TO Employees who retire or become incapacitated prior to such retirement or die on or after the 24th day of May, 2010 or whose employment is terminated on or after the said date.

CA MANOJ GUPTA
JODHPUR
09828510543

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