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Gratuity after death

CA Prashant Gupta (DGM (F & A)) (14068 Points)

05 February 2010

Dear all

A person died after service 32 years.

His heirs are getting gratuity from company.

Whether it is fully exempt or condition of exemption of gratuity i.e. 350000/-, 15day salary for every completed year will apply.

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2 Replies

Amir (Learner) (4016 Points)
Replied 05 February 2010

Dear Prashant,

Any death cum retirement gratuity received by Central and State Govt. employees, Defense employees and employees in Local authority shall be exempt u/s 10
In other cases if received by legal heirs then it is taxable under "income from other sources", since it is taxable under other sources where assesse has an option to offer his income to tax either on receipt basis or on accrual basis..
Therefore it is upto the assessee in which year it is to be taxed but exemption u/s 10 upto Rs, 3.50 lacs is available only in the year of receipt, therefore it should be offer to tax in FY 2010-2011 so that Exemption u/s 10 can be claimed

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CA Pranjal Joshi (CA) (331 Points)
Replied 07 February 2010

Section 10(10) exempts the following types of gratuities:

Death-cum-retirement gratuity received by a Government Servant.
Gratuity received by an employee as per provisions of Payment of Gratuity Act, 1972.
Any other gratuity received by an employee or his legal heirs on retirement/termination of service, death etc. limited to 1/2 month's salary for each completed year of service calculated in the manner prescribed subject to a maximum of Rs. 3.50 lakhs.

In other words, limits will be available if the case is covered by (c) as above while in case of (a) and (b) it will be exempt