Dear Friends, As all of us know the maximum ceiling for gratuity is Rs. 10 lakhs. Please let us know the tax implication on gratuity payments made to an employee. Regards, Srinivasan
From India, Mumbai
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From India, Mumbai
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Gratuity is exempted up to Rs. 10,00,000/- from Income Tax. If we pay more than that amount, it would be added to the total income, and tax will be deducted as per the slabs.
For example, if we paid Rs. 10,50,000/- as gratuity to an employee, Rs. 10,00,000 would be considered as the exempted amount. The rest of Rs. 50,000/- would be added to his total income, and tax would be deducted accordingly.
Regards
From India, Hyderabad
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86For example, if we paid Rs. 10,50,000/- as gratuity to an employee, Rs. 10,00,000 would be considered as the exempted amount. The rest of Rs. 50,000/- would be added to his total income, and tax would be deducted accordingly.
Regards
From India, Hyderabad
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Gratuity and Income Tax Implications
Gratuity is exempted up to Rs. 10,00,000/- from Income Tax. If we pay more than that amount, it would be added to the total income, and tax is to be deducted as per slabs.
For example, if we paid Rs. 10,50,000/- as gratuity to an employee, Rs. 10,00,000 would be considered as the exempted amount. The rest of Rs. 50,000/- would be added to his total income, and tax would be deducted accordingly.
TELIKEPALLI is correct, provided the calculation is in compliance with the Payment of Gratuity Act. If the above act is applicable, fractions of more than six months will be rounded as one year and added to the completed years, which will be multiplied by the last drawn salary x 15/26. If the above act is not applicable, fractions will be rounded off or fully neglected, and only completed years will be taken into account, which will be multiplied by the last drawn salary x 15/30. Hence, along with the ceiling amount, the formula to calculate gratuity will also be a factor in tax exemption.
However, in the case of death cum retirement, the full amount will be exempted from income tax.
Regards,
Abbas.P.S
From India, Bangalore
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Gratuity is exempted up to Rs. 10,00,000/- from Income Tax. If we pay more than that amount, it would be added to the total income, and tax is to be deducted as per slabs.
For example, if we paid Rs. 10,50,000/- as gratuity to an employee, Rs. 10,00,000 would be considered as the exempted amount. The rest of Rs. 50,000/- would be added to his total income, and tax would be deducted accordingly.
TELIKEPALLI is correct, provided the calculation is in compliance with the Payment of Gratuity Act. If the above act is applicable, fractions of more than six months will be rounded as one year and added to the completed years, which will be multiplied by the last drawn salary x 15/26. If the above act is not applicable, fractions will be rounded off or fully neglected, and only completed years will be taken into account, which will be multiplied by the last drawn salary x 15/30. Hence, along with the ceiling amount, the formula to calculate gratuity will also be a factor in tax exemption.
However, in the case of death cum retirement, the full amount will be exempted from income tax.
Regards,
Abbas.P.S
From India, Bangalore
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Gratuity - Taxation Issues.docx