Gratuity

In Respect of Non Government Employees covered by Payment of Gratuity Act (For the purpose of exemption of gratuity under sec.10 (10))

Gratuity amount received by non government employees covered by the Payment of Gratuity Act is tax free up to the least amount of the following:

• Amount of gratuity paid, or
• 15 days salary for every completed year of employment (salary is the amount of last salary drawn)
• Rs 10 lakh (Increased from Earlier limit of Rs. 3.50 Lakh  w.e.f. 24.05.2010)

 In Respect of Voluntary Payment of Gratuity to Employees not covered by Payment of Gratuity Act

Where companies pay gratuity voluntarily to employees who are not eligible to receive gratuity under the Act, such amount is tax free up to the least amount of the following:

• Amount of gratuity paid, or
• Half month’s salary for every completed year of employment (salary is average salary received in the last 10 months of service.)
• Rs 10 lakh (Increased from Earlier limit of Rs. 3.50 Lakh  w.e.f. 24.05.2010)

   The exemption in respect of gratuity is permissible even in cases of termination of employment due to resignation. The taxable portion of gratuity will qualify 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 subject to provisions mentioned above.

"Are u sure on this point Gratuity to death employee is exempted!!!"

Do not interpret it wrongly........... It is not totally exempted.........

Read the conditions as above, it is exempted u/s. 10(10) as per said minimum limits.