Understanding the Gratuity Limit: Is Rs. 10 Lakh the Max or Just a TDS Exemption?

Dear All,

What is the meaning of Gratuity limit Rs. 10 lakh (under section 4)? Is it only for exemption from TDS or is it the maximum limit of Rs. 10 lakh that an employer can give to an employee in case the calculation exceeds 10 lakh?

If anyone has any judgment regarding this matter, please share.

Regards,
Sikander Dogra

Dear Mr. Sikander Dogra,

The Rs. 10 lakh limit is not only for Income Tax exemption but also for statutory claim on gratuity. However, if the employer wishes, this limit is not applicable as per section 4(5) stated below:

"Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer."

Thank you,

Abbas P.S