sec. 10(10C) of I. Tax Act

can any tell me detailed explanation for exemption of Gratuity u/s 10(10C)

Replies (3)
Originally posted by :Pradeep
" can any tell me detailed explanation for exemption of Gratuity u/s 10(10C) "


 

 

5. Gratuities
Under the provisions of Section 10(10) of the IT Act, any death-cum-retirement gratuity of a government servant is completely exempt from income tax. However, in respect of private sector employees gratuity received on retirement or on becoming incapacitated or on termination or any gratuity received by his widow, children or dependants on his death is exempt subject to certain conditions.
The maximum amount of exemption is Rs. 3,50,000;. Of course, this is further subject to certain other limits like the one half-month's salary for each year of completed service, calculated on the basis of average salary for the 10 months immediately preceding the year in which the gratuity is paid or 20 months' salary as calculated. Thus, the least of these items is exempt from income tax under Section 10(10).

If gratuity act applies than: (Whichever is lower)

1. Rs 350 000

2. Actual

3. Completed yr of service*15/26*Last drawn salary

If Gratuity act not applies: (Whichever is lower)

1. Rs 350 000

2. Actual

3. Yr of service (If 6M or more considard as full yr)*15/30*Avg salary of last 10 Months

 

 

 

Gratuity not covered u/s 10(10C). It is Covered u/s 10(10)

Tax Treatment:-

1) For Govt. Employee - Fully Exempt

2) For other than Govt. Employee

    a) If Payment of Gratuity Act 1972 Applicable

        then least of the following will be exemp

        (1) Actual Amount received

         (2) Rs. 3,50,000

          (3) 15/26 days SALARY for every completed year of job and considering   a  period of  6 months or more as a completed year

          Here SALARY means = Basic Salry+DA

   (b)  If payment of Gratuity Act 1972 not applicable

         Least of the following will be exempt

        1) Actual amount received

         2) Rs. 3,50,000

        3)  15/30 days SALARY for every completed year (Ignore Fraction)

Here SALARY Means= Average Salary for Last 10 Months, immediately preeceding the month of retirement

SALARY= Basic Salary+D.A. (If forming part of salary for Retirement Benefit)+     % Based Commission

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