Tax liability on gratuity arear

An employee of a PSU of Govt of India get Rs 5 lac as gratuity arear.  What is the tax liability arises in following scenario:

* If the Employee does not claim the amount with in the Financial Year it  was sanctioned (2009-10)

** What is the tax payable computation.

*** Gratuity arear amount sanctioned in the financial year 2009-10 but the for tax saving purpose employee want to withdraw this amount in FY 2010-2011 can this act will help him to save tax.




Replies (4)

Mr.Rajesh

Gratuity received by a Government employee - fully exempt from tax.

Please rectify me if i'm wrong.....

Mr.balaji

Gratuity received by a Government employee is fully exempt from tax only when it is death-cum retirement

Dear Rajesh sir,

 

Salary wil be taxable in the year of accrual, and hence it will be taxable when it has become due and payable.

 

Also gratuity received while continuing in service is taxable. If its death or retirement gratuity the exemption can be claimed. Treatment of gratuity arrear is same as gratuity

 

Relief u/s 89(1) will be available to govt employee for arrears

Dear Rajesh

As per the current situation, gratuity is exempt only for pure Govt employees.i.e central & state. For PSU emplyees Gratuity Act is applicable and as such upto Rs 3.5 lacs only is exempt as per sec 10(10) of Income Tax Act. Any amount over & above on cumulative basis exceeding this amout (i.e. original + arrears)shall be taxable. 

If it is sanctioned in 2009-10, then it is taxable in 2009-10 on due basis ,however people are trying to postpone the drawal to save tax,which can be termed as tax avoidance and not tax planning.

People can opt for relief under section 89 as suggested by Mr G.K.

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