The Government of India has enhanced the Ceiling of payment of Gratuity from Rs.3.50 Lakhs to Rs.10 Lakhs with effect from 1/1/2006. Similarly for employees of Public Sector Employees the limit has been enhanced to Rs.10 Lakhs w.e.f. 1/1/2007. However the Income-tax exemption limit is yet to be revised retrospectively. Now the question arises as to taxability of the Grauity paid in excess of Rs.3.50 Lakhs. As per section 10 (10) of the Income-tax Act, 1961, any amount received by employees of Govt., Local Authorities and Defence Staff etc. are totally exempt. However, in respect of others like employees of PSUs a notification by GOI is required for enhancing the limit as the original exemption limit was notified ten years back i.e. year 1999. Pending this, whether the employees of PSUs will have to pay tax and if paid when they will get refunds in case when the exemption is notified later retrospectively?
CA RAMAN R M.com.
CAclubindia
