GRATUITY [Thread 45010]

DEAR ALL I HAVE A QUESTION......
GRATUITY MAXIMUM CEILING IS RS. 3.5 LACS ..CAN THE ORGANISATION PAY BEYOND THAT.............

Hi

Please go through this information, this is according to the income tax department. May be this can help you .

Gratuity (Sec. 10(10):

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

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

(a) 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.

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

(iii) In case of any other employee, gratuity received shall be exempt subject to the following exemptions:-

(a) 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.

(b) 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.

As per Board's letter F.No. 194/6/73-IT(A-1) dated 19.6.73, 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(Circular No. 573 dated 21.8.90).

Regards

Himani

Dear Gaggan, Amith & Himani,
Hi,
It is true that as per Gratuity Act, the maximum amount of gratuity may be Rs.3,50,000/-. If any employer wants to pay more than this amount that will be treated as Ex-Gratia not as gratuity. Amount only up to Rs. 3,50,000/- will be treated as gratuity for the compliance of the Gratuity Rules.
Hope this will solve your query.
Regards,
AMIT KUMAR TAWAR

There is absolutely no restriction on organisations willing to pay Gratuity beyond the prescribed amount under Payment of Gratuity Act. However, any amount paid to an employee beyond Rs.3.5 lakhs will be included in his income for deduction of tax. For example if an employer pays Rs.7 lakhs to an employee, Rs.3.5 lakhs will be included in his income for purposes of deduction of Income Tax at source.
K.S.Venkatachalam
Management Consultant

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Hi Himani
can you pl help me to find out what was the eligible gratuity as on 1-4 -1996
and subsequent changes to bring it up to 3.5 lakhs
Thanks
V S Sudhaker

hi dear all,
This is really an good exposure for me regarding gratuity.
Here i convey my sincere thanks to all who ever convey ur views.
Thanks & Regards,
Kannan

Right. I also want to corroborate this fact that I recently got my gratuity settlement. I was eligible and paid gratuity that was definitely more than 3.5L