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dnaga57
12-06-2010, 02:47 PM
My son took VRS fro Defence from 30th Sept 2009. Is his gratutity exemption 3.5 or 10 lakhs.
Would be grateful for advice

Kanaujiaml
13-06-2010, 08:19 AM
My son took VRS fro Defence from 30th Sept 2009. Is his gratutity exemption 3.5 or 10 lakhs.
Would be grateful for advice

The limit of gratuity to 10 lakhs has been raised recently. There was speculaltion that the gratuity would now be taxable but Govt. has issued clarification two days back that it would remain non-taxable.

dnaga57
13-06-2010, 08:03 PM
The limit of gratuity to 10 lakhs has been raised recently. There was speculaltion that the gratuity would now be taxable but Govt. has issued clarification two days back that it would remain non-taxable.

Thanks. Can you give any reference. I find the papers say the IT exemption will be applicable only from 25th May 2010 or so...
Thanks in advance

Kanaujiaml
14-06-2010, 02:20 PM
Thanks. Can you give any reference. I find the papers say the IT exemption will be applicable only from 25th May 2010 or so...
Thanks in advance

Tax exemption was already existing, as far as, gratuity is concerned. It continues to be so i.e. no tax is payable on gratuity. No cut off date is therefore, applicable. The cut off date is applicable in respect of raising limit of maximum gratuity from 3.5 to 10 lakhs.

ramanrao60
14-06-2010, 02:31 PM
i reckon that if the gratuity which was paid before 25 may 2010 was greater than rs 3.5 lakhs then the gratuity received minus 3.5 lakhs is taxable

just like transport allowance above rs 800 per month is taxable,even-tough now we are in receipt of TA of rs 3200+DA

Kanaujiaml
14-06-2010, 08:37 PM
i reckon that if the gratuity which was paid before 25 may 2010 was greater than rs 3.5 lakhs then the gratuity received minus 3.5 lakhs is taxable

just like transport allowance above rs 800 per month is taxable,even-tough now we are in receipt of TA of rs 3200+DA

As I said earlier, gratuity was never taxable, it is not taxable now, even after when maximum gratuity has been raised to ten lakhs.

dnaga57
15-06-2010, 08:12 AM
As I said earlier, gratuity was never taxable, it is not taxable now, even after when maximum gratuity has been raised to ten lakhs.

Dear MLK
Kindly check ITax sites.
There are two aspects
1. Raising Gratuity entitlement ( ceiling limit) from 3.5 to 10 lakhs
2. Raising Tax liability on Gratuity from 3.5 to 10 lakhs.
My understanding is that when 6 PC recommendation dealt with the former, recent legislation deals with the latter unless made applicable with retorspective effect from 1-1-2006.
This of course again divides retirees into pre 25-510 & post.
How many goofings will babudom do ?

ramanrao60
15-06-2010, 09:47 AM
let me clarify

for central government officials the scpc revised the gratuity limit from 3.5 lakhs to 10 lakhs,whereby the benefit accrued only to central government officials

then the central government revised the limit under the payment of gratuity act by passing a bill in parliament which benefitted all employees

thereafter another bill was passed amending the income tax act raising the limit for tax free gratuity from 3.5 lakhs to 10 lakhs this act applies to all categories of employees

dnaga57
15-06-2010, 10:10 AM
let me clarify

for central government officials the scpc revised the gratuity limit from 3.5 lakhs to 10 lakhs,whereby the benefit accrued only to central government officials

then the central government revised the limit under the payment of gratuity act by passing a bill in parliament which benefitted all employees

thereafter another bill was passed amending the income tax act raising the limit for tax free gratuity from 3.5 lakhs to 10 lakhs this act applies to all categories of employees

Dear Sir
You are evidently right. Only the 6th PC beneficiaries lose out on IT exemption on gratutity - just because the wheels of Govt grinding slowly. They could have amnded the IT act along woith 6thPC.
Hope they will make the amendment applicable retrospectively- espy, the babus are also affected otherwise. :)

RKPATHAK
15-06-2010, 04:11 PM
As per latest orders Graturity upto Rs 10 lakh received after 24 May 2010 is tax free. Earlier this limit was 3.5 lakh

rvenkat
15-06-2010, 04:21 PM
I h/w reproduced the orders but i can't get Memo No.

Income Tax exemption limit for gratuity enhanced to Rs.10 lakh - Central Board of Direct Taxes approved.
The government enhanced the income tax exemption limit for gratuity from Rs.3.5 lakh to Rs.10 lakh w.e.f. May 24, 2010.
The Central Board of Direct Taxes has approved notification of ten lakh rupees as the maximum amount of gratuity entitled to exemption under sub-clause (iii) of clause (10) of section 10 of the Income Tax Act 1961.
The notification will be applicable to employees who retire, or become incapacitated before retirement, or expire, or whose services are terminated, on or after the 24th May 2010.

vnatarajan
15-06-2010, 05:17 PM
May be this is useful for u all to see:
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EXtracts from some expert's Notes:
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"Gratuity Amount payable under Payment of Gratuity Act enhanced from Rs.3.5 lakhs to Rs 10 lakhs

Payment of Gratuity (Amendment) Act, 2010 (No. 15 of 2010), dated 17-5-2010

An Act further to amend the Payment of Gratuity Act, 1972.


Be it enacted by Parliament in the Sixty-first Year of the Republic of India as follows:-


Short title and commencement.


1.(1) This Act may be called the Payment of Gratuity (Amendment) Act, 2010.
(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
Amendment of section 4 of Act 39 of 1972.

2. In section 4 of the Payment of Gratuity Act, 1972, in sub-section (3), for the words “three lakhs and fifty thousand rupees”, the words “ten lakh rupees” shall be substituted.

In a move that will provide relief to the salaried class, the Union cabinet on Thursday(04.03.2010) gave its consent for enhancing the gratuity limit at the time of retirement to Rs 10 lakh.

The government will bring an amendment to the gratuity Act by tabling a fresh bill in the current session of Parliament in the coming days.

The move comes after several representations by employees' groups. They had asked for a removal of gratuity ceiling.

The current enhancement is way above the current limit of Rs 3.5 lakh, sources said. It will provide relief to employees at retirement.

Often, central and state government staff with high incomes did not get the full amount accrued in gratuity.

With the enhancement of the limit, they will get more benefits at the time of retirement.

Employees expected the benefit to be announced in the budget. But with the UPA government bringing a new bill in the same session, the concerns will be addressed.

Whether Income Tax Limit In respect of gratuity Increased?


After reading above news ,First response of all person is that "whether Income tax limit 3.5 Lakh about gratuity Increased or not?

Before Answering the question ,I will explain you the provision about Gratuity as per Income Tax act.

As per Income Tax act ,Section 10(10),employees has been divided in three categorise.

1.Employee of Central/State Government and Local bodies :Gratuity received by these employees is fully exempted without any limit.
2.Employee covered under Payment of Gratuity Act:Amount as per Gratuity Act is fully exempted .Means Income Tax has not defined /set any Limit for such employees.Means as soon as the amount of Gratuity Act ,enhanced by the Cabinet as proposed ,Income tax Limit will also enhanced.As the income Tax act only refer the Payment of gratuity act .
3.Other employee:For other remaining employee Limit is defined under the Income Tax act ,which is at present 3,50000.But many PSU ,which is not covered under the Sate or Central Govt definition as per sr number 1 and 2 above ,has started to pay ,gratuity as per Sixth pay commission ,maximum up to 10 lakh .So amount in excess of 3.5 lakh is taxable in hand of such employees .In case of Limit is enhanced in Payment of Gratuity Act as per sr number 2 even then separate notification under this sub clause[10(10)(iii)} is required .The Limit is related to date of retirement /resignation and not to date of receipt .Update :Govt has enhanced the exemption limit for psu employees retired after 24.05.2010 read more from here . .
Update
Exemption from Tax for Gratuity Payments Enhanced from Rs. 3.5 Lakh to Rs. 10 Lakh

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Friday, June 11, 2010 18:28 IST

Suppose :A person has retired on 28.2.2010 and received gratuity amount on 15.04.2010 ,Limit is enhanced from 01.04.2010.In this case person can not avail enhanced Limit .

The Good news is here that in past ,every time ,Govt has raised this limit with retrospective effect .Increase In Limit old History(recent three) is Given Below.
1.Exemption limit raised from Rs. 2,50,000 to Rs. 3,50,000 in relation to employees who retireterminated/resigned or become incapacitated prior to such retirement or die on or after 24-9-1997(date of Notification 20.1.1999-No. 10772 [F. No. 200/77/97-IT(A-I)]
2.Exemption limit of Rs.1,00,000 raised to Rs. 2,50,000 in relation to employees who retire/terminated/resigned or become incapacitated prior to such retirement or die on or after 1-4-1995 ( Notification : No. SO 394, dated 1-2-1996.)
3.Exemption limit in relation to employees who retire or become incapacitated prior to such retirement or die, on or after 1-4-1988, or whose employment is terminated on or after 1-4-1988 (Notification: No. GSR 405, dated 28-4-1988.)

Further section 10(10)(iii) says that Limit under this sub clause should be notified in accordance with limit applicable to central Govt. employees.So later or sooner the Limit Under This section will also be raised to 10 Lakh .and I wish that limit will be increased from retrospection effect from 01.01.2006.

so answer is that presently limit is not enhanced for "other employee" categorise

However employee can claim relief under section 89(1) on taxable gratuity amount .The method to calculate 89(1) relief for gratuity is different From normal 89(1) method applicable for salary received in Arrears or Advance .I will deal this issue separately in coming posts.Further Bifurcation of arrears of 6th pay commission or other arrears can now be done easily with calculator provided by simple tax India ,check here

Read more: http://www.simpletaxindia.org/2010/03/gratuity-limit-10-lakh-cabinet-consent.html#ixzz0qvAmeEcN
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vnatarajan

Kanaujiaml
17-06-2010, 07:30 AM
Dear friends. We are discussing gratuity when new DIRECT TAX CODE is being put up in parliament for passage. Its details are yet not available. I assure you a hell lot of changes are going to be made. The experience shows that every new amendment in Tax law brings more burden on Salaried Class becuse they are easy target and are sure and certain compliers.