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
Posted 3rd April 2008 From India, Mumbai
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
Posted 3rd April 2008 From India, Kannur
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.
Posted 4th June 2008 From India, Hyderabad
Hi Gaurava, Thanks for the information, Me too was looking for similar information. Good day ahead... Kiran
Posted 5th June 2008 From India, Visakhapatnam
In 6th Pay Commission The Maximum Amount Of Gratuity Has Been Enhanced To Rs.10.00 This Amount Will Be Payable To Other Govt./govt.undertaking Employees Also.
Posted 9th September 2008 From India, Mumbai
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.


Posted 9th September 2008 From India, Kannur
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.
Posted 9th September 2008 From India, Delhi
dear pay commission recommendation is different but we will also get amendement very soon in payment of gratuity act,tks j s malik
Posted 10th September 2008 From India, Delhi
Milind Shende


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.

Posted 10th September 2008 From India, Hyderabad
Hi! I would like to know whether this revised limit of gratuity is applicable to private sector also. Thanks regards Amit
Posted 11th September 2008 From India, New Delhi
Which amendment took place for limiting the gratuity to Rs.3.5 lacs.

Because if it is so companys are still providing for gratuity on the basis of 8.33% of base salary which will exceed the above limit.


Jimmy Chauhan
Posted 25th July 2009 From India, Mumbai
i would like to know that i was relieved (Officially) from private school after completing 13 yrs. but management didn't settle any gratuity and Earned leave surrenders en-cashment? is there any method to get gratuity and Earned leave en-cash? please advice me.

Posted 29th May 2010 From India, Pondicherry
Hi, Gratuity limit has been increased from 3.5L to 10L and the same is full tax exempted. But the circular is awaited still. RK Sinha
Posted 29th May 2010 From India, Ludhiana
Can anybody Guide to me, about how to do the calculation of Grauity payment? Regards Madhura.
Posted 30th May 2010 From India

Payment of Gratuity Act, 1972

Object: It is an Act to provide for a scheme for the payment of gratuity to employees engaged in factories, mines, oilfields, plantations, ports, railway companies, and shops or other establishments.

Applicability: Any Employer of the above noted establishments where 10 or more persons are employed or were employed on any day of the preceding 12 months is liable to pay gratuity to its employees. Once the Act becomes applicable, it continues even if the number of employees falls below ten.

Entitlement: Gratuity is payable to an employee (nominee - in case of death of employee) who has rendered continuous service of five years or more on his termination of employment, superannuation, retirement or resignation. Completion of continuous service of five years is not necessary where the termination of employment is due to death of disablement.


(Last Wage drawn i.e., basic + DA) x 15
26 x number of completed years of continuous service (six months or less to be ignored and more than six months to be counted as full year)

Maximum Limit: Rs.3.5 lacs. (w.e.f 24-09-1997), the same has been extended upto Rs. 10L

Time Limit for application to employer: Employee has to make an application in Form-I to his employer within 30 days from the date of gratuity becomes payable.

Gratuity Act Ammendment India 2010 (Gratuity Calculation and Payment). This is good news for all employees specially government employees. The Gratuity limit has been raised from 3.5 lacs to 10 lacs. This will give advantage to both private and public sector employees. According to this new ammendment the 10 lacs on gratuity is Tax-free.

You can calculate your gratuity online over this link.

Calculate Gratuity
Posted 30th May 2010 From India, Ludhiana
Hi There ia any pay limit for gratuity .If i am geeting 18 lack as gratuity how much is taxable or how much non taxable.
Posted 17th October 2012 From India, Delhi


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