Gratuity Limit
Rajesh B Shah
(Querist) 09 June 2010
This query is : Resolved
My client has done job in Dena Bank from last 20 Years, he was retired on 31st March’10 and he got Gratuity Benefit of Rs.3,67,840 in F.Y : 2009-10 (Which is mention in his Form No.16). Should he get benefit of new limit of Gratuity ? Please guide me. (which limit is applicable : Rs.3,50,000/- or Rs.10,00,000/-in F.Y : 2009-10, A.Y : 2010-11)
Parthasarathi Loganathan
(Expert) 09 June 2010
Effective date for payment of revised gratuity has already been notified. Please check up the relevant notifications as per the entitlements of your client.
A V Vishal
(Expert) 09 June 2010
Date of enforcement of Payment of Gratuity (Amendment) Act, 2010
Notification No. S.O. 1217(E), dated 24-5-2010
In exercise of the powers conferred by sub-section (2) of Section 1 of The Payment of Gratuity (Amendment) Act, 2010 (15 of 2010), the Central Government hereby appoints the 24th day of May, 2010, as the date on which the said Act shall come into force.
A V Vishal
(Expert) 09 June 2010
As per Income Tax act ,Section 10(10),employees has been divided in three categorise.
1. Employee of Central/State Government and Local bodies :Gratuity received by these employees is fully exempted without any limit.
2. Employee covered under Payment of Gratuity Act:Amount as per Gratuity Act is fully exempted .Means Income Tax has not defined /set any Limit for such employees.Means as soon as the amount of Gratuity Act ,enhanced by the Cabinet as proposed ,Income tax Limit will also enhanced.As the income Tax act only refer the Payment of gratuity act .
3. Other employee:For other remaining employee Limit is defined under the Income Tax act ,which is at present 3,50000.But many PSU ,which is not covered under the Sate or Central Govt definition as per sr number 1 and 2 above ,has started to pay ,gratuity as per Sixth pay commission ,maximum up to 10 lakh .So amount in excess of 3.5 lakh is taxable in hand of such employees .In case of Limit is enhanced in Payment of Gratuity Act as per sr number 2 even then separate notification under this sub clause[10(10)(iii)} is required .The Limit is related to date of retirement /resignation and not to date of receipt .
Suppose :A person has retired on 28.2.2010 and received gratuity amount on 15.04.2010 ,Limit is enhanced from 01.04.2010.In this case person can not avail enhanced Limit .
The Good news is here that in past ,every time ,Govt has raised this limit with retrospective effect .Increase In Limit old History(recent three) is Given Below.
1. Exemption limit raised from Rs. 2,50,000 to Rs. 3,50,000 in relation to employees who retireterminated/resigned or become incapacitated prior to such retirement or die on or after 24-9-1997(date of Notification 20.1.1999-No. 10772 [F. No. 200/77/97-IT(A-I)]
2. Exemption limit of Rs.1,00,000 raised to Rs. 2,50,000 in relation to employees who retire/terminated/resigned or become incapacitated prior to such retirement or die on or after 1-4-1995 ( Notification : No. SO 394, dated 1-2-1996.)
3. Exemption limit in relation to employees who retire or become incapacitated prior to such retirement or die, on or after 1-4-1988, or whose employment is terminated on or after 1-4-1988 (Notification: No. GSR 405, dated 28-4-1988.)
Further section 10(10)(iii) says that Limit under this sub clause should be notified in accordance with limit applicable to central Govt. employees.
Jagmohan Rawat
(Expert) 12 June 2010
CBDT has also approved the increase in gratuity limit to Rs.10 lac as exemption u/s 10(10)(iii)w.e.f. 24.5.2010.The notification will be applicable to employees who retire, or become incapacitated before retirement, or expire, or whose services are terminated, on or after the 24th May 2010.
