Leave salary & Gratuity

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Ashish Agrawal (Querist)
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26 October 2009 Leave salary & Gratuity paid to widow on death of employee whether taxable or exempt?

second thing whether Employer is liable to deduct TDS on payment?

Kapil Arora

Kapil Arora (Expert)
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26 October 2009 Yes this will be taxable in the hands of widow in other sources head and employer has to deduct tax on the same,,,,,under inocme tax act, 1961

Anjani Pratap Tiwari

Anjani Pratap Tiwari (Expert)
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27 October 2009 Widow can claim exemption 10(10AA) and 10(10)

CA SANJAY MUKHERJEE

CA SANJAY MUKHERJEE (Expert)
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27 October 2009 Hi Ashish

You may find the discussion in the following link is relevent.

https://www.taxworry.com/2007/10/are-gratuity-leave-salary-received-by.html.

Thanks

Sanjay

ANIL JANGID

ANIL JANGID (Expert)
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27 October 2009 Gratuity [Section 10(10)]:
Any death cum retirement gratuity received by Central and State Govt. employees, Defense employees and employees in Local authority shall be exempt.
Any gratuity received by persons covered under the Payment of Gratuity Act, 1972 shall be exempt subject to following limits:-
For every completed year of service or part thereof, gratuity shall be paid at the rate of fifteen days wages based on the rate of wages last drawn by the concerned employee.
The amount of gratuity as calculated above shall not exceed Rs. 3,50,000/- (w.e.f. 24.9.97).
In case of any other employee, gratuity received shall be exempt, subject to the following exemptions
Exemption shall be limited to half month salary (based on last 10 months average) for each completed year of service or Rs. 3.5 Lakhs whichever is less.
Where the gratuity was received in any one or more earlier previous years also and any exemption was allowed for the same, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 3.5. Lakhs.
The exemption in respect of gratuity is permissible even in cases of termination of employment due to resignation. The taxable portion of gratuity will quality for relief u/s 89(1). Gratuity payment to a widow or other legal heirs of any employee who dies in active service shall be exempt from income tax

Leave Encashment [Section 10(10AA)]:
Leave Encashment during service is fully taxable in all cases, relief u/s 89(1), if applicable, may be claimed for the same.
Payment by way of leave encashment received by Central & State Govt. employees at the time of retirement in respect of the period of earned leave at credit is fully exempt.
In case of other employees, the exemption is to be limited to a maximum of 10 months of leave encashment, based on last 10 months average salary. This is further subject to a limit of Rs. 3,00,000/-.
Leave salary paid to legal heirs of a deceased employee in respect of privilege leave standing to the credit of such employee at the time of death is not taxable.
Provided that where any such payments are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under sub-clause 42 shall not exceed the specified limit i.e. Rs. 300000/-.
For the purpose of Section 10(10AA), the term â€˜Superannuation or otherwiseâ€™ covers resignation.

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