Tax on Gratuity(inexcess of Rs 10 Lakhs) in case of Death

This query is : Resolved

YASH PAUL (Querist)
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21 January 2011 A regular Employee in Public Sector Undertaking died on 15.04.2010. The Gratuity paid by employer is Rs 11.50 Lakhs. What shall be Taxable portion for Gratuity.
Please advise and provide Income tax provisions on the subject cited above.

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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21 January 2011 Applicable section is 10(10)(iii) of the Income tax Act,1961. Maximum exemption is3,50,000/-only. Enhanced exemption of Rs. 10,00,000/-is available for those employees retired / terminated / incapcitated / died on or after 24/05/2010 vide CBDT notification 43/2010 dated 11/06/2010.

YASH PAUL

YASH PAUL (Querist)
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24 January 2011 I an thankful for your reply. Kindly advise if following circular has any implications in respect of exemption of gratuity payable in case of death.

Circular : No. 573, dated 21-8-1990.
Taxability of lump sum payment made gratuitously or by way of compensation or otherwise to widow/other legal heirs of an employee
1. Clarifications have been sought from the Central Board of Direct Taxes whether a lump sum payment made gratuitously or by way of compensation or otherwise, to the widow or other legal heirs of an employee, who dies while still in active service, is taxable as income under the Income-tax Act, 1961.
2. The issue has been examined by the Board and it is clarified that any such lump sum payment will not be taxable as income under the aforesaid Act.
Circular : No. 573, dated 21-8-1990.