Gratuity

1) It is the payment received from the company by the employee in appreciation of past service.

Hence it is given out of love and regard for good work done by employee during job

2) It may be received on retirement by the employee himself or on death, by his/her legal heir .

How to Calculate Exemption

For Central Government /State Government Employees/Member of Defence Service covered under Pension Code

Fully Exempt

For Other Employees

 There can be 2 cases

Note :−

1)Note: Only gratuity received at the time of retirement or death is exempt as above.f gratuity received during employment it is fully taxable

2) If gratuity received from more than 1 employer then Rs.1000000/- is the total limit for all the employers.

3)The amount worked under previous employers to be added for calculating total period of service

This is done only if employee has not claimed exemption earlier .

Question

Mr. Ravi retired on 15.6.2015 after completion of 26 years 8 months of service and received gratuity of Rs 6,00,000. At the time of retirement his salary was:

Compute his taxable gratuity assuming:

(i)  He is non-government employee and covered by the Payment of Gratuity Act

(ii) He is non-government employee and not covered by Payment of Gratuity Act

(iii) He is a Government employee