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LIMIT OF GRATUITY AMOUNT - Terminating An Employee

MILINDSHENDE73 Started The Discussion:

Please help me. What is maximum limit amout to be paid as gratuity & will be exempted under Income tax? Kindly also provide any written document as support. Regards Milind Shende

Madhu.T.K - Senior Member
The maximum amount of gratuity payable under the Payment of Gratuity Act, 1972 is Rs 3.5 lakh. The amount received is not taxable. Regards, Madhu.T.K

meet_gaurava - Contributing Member
Dear Madhu/ Milind,

Gratuity Act does not limit the maximum amount that a person can receive in the form of gratuity. Payment of Gratuity Act 1972 Sec. 4 (5).
It says that employer can cap his liability to a maximum of Rs. 3.5 lakh per employee but nothing in the law prohibits him to provide better benefit than the one mentioned.

Though the Income Tax Act says that as long as the Gratuity amount is not exceeding 8.33% of employees annual salary, its not taxable even if it crosses 3.5 lakh limit (Ref. Income Tax Act RR 98 to 111)

There are companies who pay gratuity without cap i.e. an employee can accumulate gratuity as long as he work, even if he crosses 3.5 lakh limit.

kirankay - 
Hi Gaurava, Thanks for the information, Me too was looking for similar information. Good day ahead... Kiran

In 6th Pay Commission The Maximum Amount Of Gratuity Has Been Enhanced To Rs.10.00 Lakhs.is This Amount Will Be Payable To Other Govt./govt.undertaking Employees Also.

Madhu.T.K - Senior Member
Pay commission declaration is for the government employees whereas we have been discussing about the Payment of Gratuity Act, 1972. The gratuity payable to government employees is entirely different from the one specified in the aforesaid Act.

egards,

Madhu.T.K

arti nair - 
Sec 4 of the Payment of Gratuity ACT, 1972 lays down that nothing in the section shall prohibit the employee from receiving greater amount of gratiuty than the minimum prescribed. if the empolyer is offering better in terms of gratuity, the employee can accept it.upto 3.5 lakhs is exmpted.

malikjs - Senior Member
dear pay commission recommendation is different but we will also get amendement very soon in payment of gratuity act,tks j s malik

nvraovskp - Contributing Member
Milind Shende

Friend

According to the recent amendment made to the payment of gratuity act, the maximum amount payable to an employee is Rs 3.5 lakh provided if he completes the continuous period of 5 years under the same employer. the provisions of income tax not applicable for Gratuity but if an employee deposits the said amount in any bank, the interest payable on gratuity amount is liable for income tax deduction.

NVRao

amit_lycos - Contributing Member
Hi! I would like to know whether this revised limit of gratuity is applicable to private sector also. Thanks regards Amit

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