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There is no ceiling as per the Gratuity Act. However, the ceiling limit is in the Income Tax Act, which prescribes the maximum amount that shall not be chargeable to tax.
Nowhere do both legislations state that gratuity exceeding Rs. 3,50,000/- cannot be paid. Any amount above Rs. 3,50,000/- would be chargeable to tax in the hands of the recipient. The corporates restrict the amount payable to Rs. 3,50,000/- to save their liability on account of Gratuity.
From India, New Delhi
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Nowhere do both legislations state that gratuity exceeding Rs. 3,50,000/- cannot be paid. Any amount above Rs. 3,50,000/- would be chargeable to tax in the hands of the recipient. The corporates restrict the amount payable to Rs. 3,50,000/- to save their liability on account of Gratuity.
From India, New Delhi
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Hi Avika,
You have made a mistake by saying there is no ceiling limit as per the Gratuity Act. The ceiling limit as per the Gratuity Act under Section 4(3) states that "THE AMOUNT OF GRATUITY PAYABLE TO AN EMPLOYEE SHALL NOT EXCEED (three lakhs and fifty thousand) RUPEES." Please refer to the said section to confirm this information and to update yourself.
Mohan Rao
Manager HR
From India, Visakhapatnam
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You have made a mistake by saying there is no ceiling limit as per the Gratuity Act. The ceiling limit as per the Gratuity Act under Section 4(3) states that "THE AMOUNT OF GRATUITY PAYABLE TO AN EMPLOYEE SHALL NOT EXCEED (three lakhs and fifty thousand) RUPEES." Please refer to the said section to confirm this information and to update yourself.
Mohan Rao
Manager HR
From India, Visakhapatnam
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Dear All,
If a company has set up a Gratuity Fund under a board of trustees picked from managers of the company and administered by the company-appointed manager, and the fund has a separate set of rules approved by the Income Tax authority for the benefit of the employees, the company may pay an additional amount of gratuity over and above the ceiling (Rs. 3.5 lakhs) of the Payment of Gratuity Act. However, such additional amounts are subject to Income Tax deductions.
From India, Calcutta
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If a company has set up a Gratuity Fund under a board of trustees picked from managers of the company and administered by the company-appointed manager, and the fund has a separate set of rules approved by the Income Tax authority for the benefit of the employees, the company may pay an additional amount of gratuity over and above the ceiling (Rs. 3.5 lakhs) of the Payment of Gratuity Act. However, such additional amounts are subject to Income Tax deductions.
From India, Calcutta
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Circular No 1-2018 Processing of income-tax returns under section 143(1) of the Income-tax Act .pdf
PENALTIES UNDER INCOME TAX ACT.docx
Income Tax Calculator.xls