“Employees who retire, become incapacitated, terminated, or die on or after May 24, 2010, will get I-T exemption for gratuity up to Rs 10 lakh,” the finance ministry said in a statement, notifiying the rule related to gratuity.
The Payment of Gratuity (Amendment) Bill, 2010, relating to the exemption was passed by Parliament in the Budget session. Initially, the Sixth Pay Commission had raised the limit for central government employees and the Cabinet later extended it for the private sector employees as well. The Payment of Gratuity Act, 1972, applies to factories and other establishments employing 10 or more persons. On completion of five years service, the employees are entitled to payment of gratuity at the rate of 15-day wages for every completed year of service or part of it in excess of six months subject to a maximum of Rs 3.5 lakh. However, gratuity is considered an income and the employee who receives it is liable to pay tax on it. However, gratuity up to Rs 3.5 lakh is exempt from tax under the provisions of Section 10(10) of the Income Tax Act, 1961.
Download : Payment of Gratuity (Amendment) Bill
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Rationale for selecting 24th.May,2010 as the cut off date? What about thousands of employees of Public Sector who retiredbetween 1.1.2007 and 24th.May,2010? Why are they forced for a TDS on enhanced gratuity (6.5Lacs) amounting to nearly 2 lacs. There must be a Totally Taxfree Gratuity as is in case of all govt. employees.
Dr.S.K.Rajvanshi
[...] Income-Tax exemption limit for gratuity raised to Rs 10 lakh [...]
[...] Income-Tax exemption limit for gratuity raised to Rs 10 lakh [...]