I have one query: Can an employer pay retired employees all dues such as Leave Encashment, gratuity, pay arrears, etc., in two different financial years so that the employee could benefit from income tax? For instance, if an employee retires in Nov '12, they are entitled to all retirement benefits like gratuity and leave encashment in the same financial year. However, along with their salary for that particular year, they face heavy tax liability on that income. Is it possible for the employer and employee to have a mutual discussion and pay some part of the retirement dues in the next financial year to allow the employee to benefit from income tax?
Please provide an answer to this query from the employer's point of view, considering the rules and regulations of the Income Tax Act, 1961.
Regards,
Harshada
From India, Mumbai
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Please provide an answer to this query from the employer's point of view, considering the rules and regulations of the Income Tax Act, 1961.
Regards,
Harshada
From India, Mumbai
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Gratuity
The Act clearly stipulates that gratuity should be paid within 30 days from the date it falls due. So, you are bound to pay the gratuity within the stipulated time. Employers have no option.
Earned Leave Encashment
Earnings from EL encashment are not taxable if earned at the time of retirement. So, you need not worry about tax implications.
Pay Arrears
I did not understand what you mean by paying arrears. Please explain.
From India, Pune
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177The Act clearly stipulates that gratuity should be paid within 30 days from the date it falls due. So, you are bound to pay the gratuity within the stipulated time. Employers have no option.
Earned Leave Encashment
Earnings from EL encashment are not taxable if earned at the time of retirement. So, you need not worry about tax implications.
Pay Arrears
I did not understand what you mean by paying arrears. Please explain.
From India, Pune
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Taxation on Retirement Benefits
Which retirement benefits attract tax? My understanding is that gratuity up to an amount of Rs 10 lakhs is non-taxable. Similarly, leave encashment at the time of superannuation is also non-taxable. PF accumulations are another benefit that employees receive and are also non-taxable.
Then, why should the payment be made in two installments? If the employer is more concerned about cash outflow rather than the employer's tax liability, I will support the employee!
Regards,
Madhu.T.K
From India, Kannur
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Which retirement benefits attract tax? My understanding is that gratuity up to an amount of Rs 10 lakhs is non-taxable. Similarly, leave encashment at the time of superannuation is also non-taxable. PF accumulations are another benefit that employees receive and are also non-taxable.
Then, why should the payment be made in two installments? If the employer is more concerned about cash outflow rather than the employer's tax liability, I will support the employee!
Regards,
Madhu.T.K
From India, Kannur
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How to reduce tax on your Retirement Benefits.docx