| Dear Chawla2010,
CPSU executives are eligible for enhanced gratuity upto maximum Rs. 10 lakhs with effect from 01.01.2007 as per DPE guidelines dtd 26.11.2008.However, as far as taxability is concerned it would be taxable beyond Rs.3.5 lakhs.This is because as per Section10(10)(ii) of Chapter Three of Income Tax Act,1961 gratuity payable to employees covered under Payment Of Gratuity Act,1972 is exempt from income tax subject to the provisions of subsection 2 and 3 of section 4.Subsection 2 gives the rate of calculation of gratuity and subsection 3 gives the maximum limit of payable gratuity as Rs.3.5 lakhs .Unless Subsection 3 of Section 4 the Payment Of Gratuity Act,1972 is amended and ceiling enhanced to Rs.10 lakhs the same position will continue.As far as Central Govt employees are concerned they are paid Death-cum-retirement Gratuity which is also enhanced to maximum of Rs.10 lakhs with effect from 01.01.2006 .It is governed by 10(10)(i) of Chapter Three of Income Tax Act,2009 .As per that section the total amount is exempt from Income Tax . However, the employees of those PSUs whose gratuity was enhanced to Rs.10 lakhs are representing before the concerned ministries to amend the Payment Of Gratuity Act,1972 enhancing the maximum limit of payable gratuity to Rs.10 lakhs under subsection 3 of section 4 so that income tax exemption upto Rs.10 lakhs becomes automatically applicable.  | 
