Gratuity Payments: What Document Ensures They're Non-Taxable with the IT Department?

Gratuity Payment Documentation

What document is a company supposed to issue for making gratuity payments? This document can be used to consider gratuity payments non-taxable with the IT department.

Tax-Free Gratuity Receipt

Any amount of gratuity receipt computed on the basis of 15 days' salary for every completed year of service, subject to a maximum of Rs 20 lakhs, is tax-free in the hands of the individual. There is no record required.

It is the responsibility of the employer to issue notice in Form L as per Sec. 8(1)(i) of the Payment of Gratuity Act specifying the amount of gratuity payable. This will help you get the IT relief.

Section 8 in The Payment Of Gratuity (Central) Rules, 1972:

Notice for payment of gratuity - (1) Within fifteen days of the receipt of an application under rule 7 for payment of gratuity, the employer shall:
(i) if the claim is found admissible on verification, issue a notice in Form 'L' to the applicant employee, nominee, or legal heir, as the case may be, specifying the amount of gratuity payable and fixing a date, not being later than the thirtieth day after the date of receipt of the application, for payment thereof, or
(ii) if the claim for gratuity is not found admissible, issue a notice in Form 'M' to the applicant employee, nominee, or legal heir, as the case may be, specifying the reasons why the claim for gratuity is not considered admissible. In either case, a copy of the notice shall be endorsed to the controlling authority.

(2) In case payment of gratuity is due to be made in the employer's office, the date fixed for the purpose in the notice in Form 'L' under clause (i) of sub-rule (1) shall be re-fixed by the employer if a written application in this behalf is made by the payee explaining why it is not possible for him to be present in person on the date specified.