GRATUITY – Taxation Issues
Income tax assumes gratuity as capital receipts and exempts gratuity receipts up to Rs 10,00,000. This means that you need not to pay tax, subject to some conditions, for gratuity receipts up to Rs 10 Lakhs. Gratuity beyond this limit is paid by employee under ex-gratia head and always taxable.
Calculation of tax empmption:
Categorization of employees for exemption Under Section 10(10) Are:-
- Government employee and employee of local authorities.
- Employee covered under the Payment of Gratuity Act, 1972
- Other employees not covered under the Payment of Gratuity Act, 1972. (Gratuity payments under this category is hardly seen and hence not discuss in this paper)
Exempted amount should be Minimum of the Following:
i) Actual gratuity received
ii) 15 days Basic and DA for each completed year of service or part thereof in excess of six months considering 26 days in a month
iii) Rs 10 Lakhs
See the attached files for the complete articles on "Gratuity - Taxation Issues"
From India, Mumbai
8Income tax assumes gratuity as capital receipts and exempts gratuity receipts up to Rs 10,00,000. This means that you need not to pay tax, subject to some conditions, for gratuity receipts up to Rs 10 Lakhs. Gratuity beyond this limit is paid by employee under ex-gratia head and always taxable.
Calculation of tax empmption:
Categorization of employees for exemption Under Section 10(10) Are:-
- Government employee and employee of local authorities.
- Employee covered under the Payment of Gratuity Act, 1972
- Other employees not covered under the Payment of Gratuity Act, 1972. (Gratuity payments under this category is hardly seen and hence not discuss in this paper)
Exempted amount should be Minimum of the Following:
i) Actual gratuity received
ii) 15 days Basic and DA for each completed year of service or part thereof in excess of six months considering 26 days in a month
iii) Rs 10 Lakhs
See the attached files for the complete articles on "Gratuity - Taxation Issues"
From India, Mumbai
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FORM-F-NOMINATI ON OF GRATUITY.pdf
Gratuity Form I.doc