Gratuity

Johnson S (Querist) 24 April 2013 This query is : Resolved
Please let me know whether the gratuity paid to an employee when he leaves company is taxable. If so how can he avoid the tax.

Rgds
Johnson.

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Raj Kumar Makkad (Expert) 24 April 2013
Gratuity can be received by the employee at the time of his retirement or by his legal heir in the event of death of the employee. Gratuity received by an employee on his retirement is taxable under the head "Salary" and gratuity received by the legal heir is taxable under the head" Income from Other Sources".

In both the above situations gratuity upto a specified limit is exempt under the provisions of sec.10(10) of the Income Tax Act, 1961.

Kuummaar AS (Expert) 24 April 2013
Subject to eligibility, Gratuity upto rupees 10 lakh is exempt.

Sudhir Kumar, Advocate (Expert) 24 April 2013
agreed.

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