I worked for a company for 27 years and as per calculation, Gratuity amount exceeds 20L. But company states that wrt Notification SO 1420 E dated 29th Mar 2018 max amount payable will be 20L.
Please suggest if 20L limit is for determining tax liability or 20L is max limit under any circumstances or should company pay actual amount as per calculation making 20L as non taxable and balance as taxable.
From India, Mumbai
Please suggest if 20L limit is for determining tax liability or 20L is max limit under any circumstances or should company pay actual amount as per calculation making 20L as non taxable and balance as taxable.
From India, Mumbai
Rs 20 lakhs is the maximum amount of gratuity payable by the employer as per Payment of Gratuity Act. As such no employer has any legal liability to pay gratuity over and above this amount even if the total amount would exceed Rs 20 lakhs. Certainly, if the employer is ready to pay, he can pay amount exceeding Rs 20 lakhs, deducting tax from the amount over Rs 20 lakhs at the prescribed rate of slab in which the employee would fall. But if the employer is not willing to pay the actual gratuity which is above Rs 20 lakhs, you cannot do anything.
From India, Kannur
4193From India, Kannur
Hi,
As per Gratuity Act Twenty Lakhs will be the upper ceiling limit and it will be tax free.
Anything over and above Twenty Lakhs will be subject to tax and also there be should some predetermined contract or agreement between employer and employee that Gratuity payment will be made on actual calculations basis without restricting it to upper ceiling limit. So please check your Appointment order or contract of employment terms. In other words in depends on the policy of the Employer whether to pay Gratuity payment will be subject to upper ceiling limit of Twenty Lakhs or actual calculation in case if it exceeds Twenty Lakhs.
From India, Madras
As per Gratuity Act Twenty Lakhs will be the upper ceiling limit and it will be tax free.
Anything over and above Twenty Lakhs will be subject to tax and also there be should some predetermined contract or agreement between employer and employee that Gratuity payment will be made on actual calculations basis without restricting it to upper ceiling limit. So please check your Appointment order or contract of employment terms. In other words in depends on the policy of the Employer whether to pay Gratuity payment will be subject to upper ceiling limit of Twenty Lakhs or actual calculation in case if it exceeds Twenty Lakhs.
From India, Madras
What is the employer’s legal liability to pay the gratuity, if calculation amount comes more than 20 lakh, please clear, whether any where mention in gratuity act, attached copy also.
From India, Delhi
From India, Delhi
The employer's liability under payment of Gratuity is given under section 4(3) of the payment of Gratuity Act which reads as:
3) The amount of gratuity payable to an employee shall not exceed such amount as may be notified by the Central Government from time to time.
Accordingly, the Central Government will notify the maximum amount payable from time to time. The current notification is attached here. Please see that S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee under the said Act shall not exceed twenty lakh rupees.
See the attachment.
From India, Kannur
3) The amount of gratuity payable to an employee shall not exceed such amount as may be notified by the Central Government from time to time.
Accordingly, the Central Government will notify the maximum amount payable from time to time. The current notification is attached here. Please see that S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee under the said Act shall not exceed twenty lakh rupees.
See the attachment.
From India, Kannur
Hi Deepak,
Gratuity is a statutory benefit provided to employees by the employer under the Payment of Gratuity Act, 1972 in India. The act specifies the conditions under which gratuity is payable and the amount of gratuity payable.
Regarding the limit of 20 lakhs, it's essential to understand the context. The notification SO 1420 E dated 29th March 2018 did indeed introduce a cap of 20 lakhs on the maximum amount of gratuity payable under the Payment of Gratuity Act, 1972. This means that regardless of the length of service or the actual calculation, the maximum gratuity payable to an employee cannot exceed 20 lakhs.
Now, this limit is not for determining tax liability; it's a cap on the amount of gratuity payable by the employer. Anything beyond this limit is not statutorily mandated and is at the discretion of the employer.
However, any gratuity received by an employee up to Rs. 20 lakhs is exempt from income tax under Section 10(10) of the Income Tax Act, 1961. So, if an employee receives gratuity of up to 20 lakhs, it will be tax-free. Any amount above 20 lakhs will be taxable as per the income tax laws applicable at the time of receipt.
In your case, if your gratuity amount exceeds 20 lakhs, the company is correct in stating that they are bound by the cap of 20 lakhs as per the notification. They should pay you the gratuity amount as per the calculation up to 20 lakhs, which will be tax-free. Any amount beyond that will be taxable. However, you may want to consult with a legal or financial advisor for personalized advice based on your specific circumstances.
Thanks
From India, Bangalore
Gratuity is a statutory benefit provided to employees by the employer under the Payment of Gratuity Act, 1972 in India. The act specifies the conditions under which gratuity is payable and the amount of gratuity payable.
Regarding the limit of 20 lakhs, it's essential to understand the context. The notification SO 1420 E dated 29th March 2018 did indeed introduce a cap of 20 lakhs on the maximum amount of gratuity payable under the Payment of Gratuity Act, 1972. This means that regardless of the length of service or the actual calculation, the maximum gratuity payable to an employee cannot exceed 20 lakhs.
Now, this limit is not for determining tax liability; it's a cap on the amount of gratuity payable by the employer. Anything beyond this limit is not statutorily mandated and is at the discretion of the employer.
However, any gratuity received by an employee up to Rs. 20 lakhs is exempt from income tax under Section 10(10) of the Income Tax Act, 1961. So, if an employee receives gratuity of up to 20 lakhs, it will be tax-free. Any amount above 20 lakhs will be taxable as per the income tax laws applicable at the time of receipt.
In your case, if your gratuity amount exceeds 20 lakhs, the company is correct in stating that they are bound by the cap of 20 lakhs as per the notification. They should pay you the gratuity amount as per the calculation up to 20 lakhs, which will be tax-free. Any amount beyond that will be taxable. However, you may want to consult with a legal or financial advisor for personalized advice based on your specific circumstances.
Thanks
From India, Bangalore
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