Payment Of Gratuity Act [Thread 301352]

Can any one pls confirm me if the employee has served two different company with more than 5 yrs of Services & if the employees has already recd. Rs 3,50,000/- as exempted as from the earlier company as per Payment of Gratuity Act. Can he still claim Rs 10,00,000/- as per the new amendment & get the full exemption , or we should give him /her the exmption to the tune of Rs 6,50,000/-

Dear Nitin Borhade,
I don't know the correct answer for the above query. But as per section 4(5) of the Payment of Gratuity Act, employer can pay in excess of ceiling limit.
Abbas.P.S

Thanks for the update , but my question is can we give the exemption more than Rs 1000000/- in totality.
Since already he/she had claim for Rs 3,50,000/- from his/her previous employer & now can we give him exemption upto Rs 10,00,000/- Or the celing limit of Rs ,10,00,000/- exemption is for the entire year.
Since in this case employee is confirming/ declaring that he/she had already got Rs 3,50,000/- , in such case, whether employee will get the full exemption for Rs 10,00,000/- or it should restrict to Rs 6,50,000/- & taxable to Rs. 3,50,000/-

Nitin Borhade,

I shall quote TAXGURU on Income Tax exemption of gratuity amount as under :

"Tax treatment of gratuity :- For the purpose of exemption of gratuity under sec.10 (10) the employees are divided under three categories:

Any death cum retirement gratuity received by Central and State Govt. employees, Defense employees and employees in Local authority shall be exempt.

Any gratuity received by persons covered under the Payment of Gratuity Act, 1972 shall be exempt subject to following limits:-

For every completed year of service or part thereof, gratuity shall be paid at the rate of fifteen days wages based on the rate of wages last drawn by the concerned employee.

The amount of gratuity as calculated above shall not exceed Rs. 3,50,000/- (w.e.f. 24.9.97).

In case of any other employee, gratuity received shall be exempt, subject to the following exemptions

Exemption shall be limited to half month salary (based on last 10 months average) for each completed year of service or Rs. 3.5 Lakhs whichever is less.

Where the gratuity was received in any one or more earlier previous years also and any exemption was allowed for the same, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 3.5. Lakhs.

The exemption in respect of gratuity is permissible even in cases of termination of employment due to resignation. The taxable portion of gratuity will quality for relief u/s 89(1). Gratuity payment to a widow or other legal heirs of any employee who dies in active service shall be exempt from income tax subject to provisions mentioned above.

The ceiling of Rs.3.5 lakh applies to the aggregate of gratuity received from one or more employers in the same or different years."

Note : The above information is dated 8.11.2009. At that time ceiling limit was Rs. 3,50,000. In May 2010 it got enhanced to Rs. 10,00,000.

Abbas.P.S