Govt increases Gratuity exemption limit u/s Section 10(10)(iii)  to ₹ 20 lakhs from existing Rs. 10 Lakh vide Notification No. 16/2019 dated 8th March, 2019. This move will benefit those employees of PSUs and other employees not covered by Payment of Gratuity Act, 1972.

Limit for employees covered by Payment of Gratuity Act, 1972 was already been increased in private sector and in PSUs vide Government of India Notification dated 29.03.2018 under which the gratuity amount ceiling has been increased from Rs.10 lakhs to 20 lakhs w.e.f. 29.3.2018.

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

Notification No. 16/2019

New Delhi, the 8th March, 2019

(Income-tax)

S.O. 1213(E).—In exercise of the powers conferred by sub-clause (iii) of clause (10) of section 10 of the Income-tax Act, 1961 (43 of 1961), and in supersession of Ministry of Finance, Department of Revenue, notification number S.O. 141(E), dated the 11th June, 2010, except as respects things done or omitted to be done before such supersession, the Central Government, having regard to the maximum amount of any gratuity payable to employees, hereby specifies twenty lakh rupees as the limit for the purposes of the said sub-clause in relation to the employees who retire or become incapacitated prior to such retirement or die on or after the 29th day of March, 2018 or whose employment is terminated on or after the said date.

[Notification No. 16/2019/F. No. 200/8/2018-ITA-I]

RAJARAJESWARI R., Under Secy.

———–

Extract of section 10(10) of Income Tax Act, 1961 for ready reference of our readers

(10) (i) any death-cum-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;

(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4 of that Act ;

(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month’s salary for each year of completed service, calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government :

Provided that where any gratuities referred to in this clause are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause shall not exceed the limit so specified :

Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause shall not exceed the limit so specified as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.

Explanation.—In this clause, and in clause (10AA), “salary” shall have the meaning assigned to it in clause (h) of rule 2 of Part A of the Fourth Schedule ;

More Under Income Tax

7 Comments

  1. AnilGoel says:

    At the time of my retirement on 31.01.2018, I received Rs. 10,00,000 towards gratuity settlement. Subsequent to amendment in Gratuity Act , I received the enhanced gratuity amount OF rS. 10,00,000 during June 2019 after deduction of tax. Please CONFIRM if I can claim the refund of TDS on the enhanced gratuity amount while filing the IT return for the Assessment Year 2020-21.

  2. AnilGoel says:

    Please note the following for necessary clarifications:
    Mr. X retired from the services of PSU on 31.01.2-018. Although the wage revision was due from 01.01.2017 but the same was approved by concerned authorities in March 2019. Simultaneously the limit of Gratuity amount was also revised from Rs.10 Lakh to Rs.20 Lakh. At the time of retirement Mr. X received tax free Gratuity amount of Rs. 10 Lakh only. Following is the Govt. directives:
    Govt increases Gratuity exemption limit u/s Section 10(10)(iii) to ₹ 20 lakhs from existing Rs. 10 Lakh vide Notification No. 16/2019 dated 8th March, 2019. This move will benefit those employees of PSUs and other employees not covered by Payment of Gratuity Act, 1972.

    Limit for employees covered by Payment of Gratuity Act, 1972 was already been increased in private sector and in PSUs vide Government of India Notification dated 29.03.2018 under which the gratuity amount ceiling has been increased from Rs.10 lakhs to 20 lakhs w.e.f. 29.3.2018.

    Now Mr. X received Gratuity arrears (Rs.10 Lakh) during the financial year 2019~2020. Please confirm if the Gratuity arrears of Rs.10 Lakh received during 2019~20 is taxable or not.

    Looking forward to an early response please, as ITR is to be submitted shortly.
    ANILGOEL.MF@GMAIL.COM

  3. Sivakumar says:

    Dear Sir
    An employee worked in State Electricity Board Employees Thrift Society and retired on 31.01.
    2020 . The said society is not Govt Company/Office.
    At the time of retirement/superannuation, the said employee has received Rs.10.20 Lakhs as Gratuity under the provisions of The Gratuity Act 1972 .
    In addition to that an amount of Rs. 2.50 Lakhs received by the employee as : Mentorious Service amount of his service over a period of 20+ years.
    The said amount of Rs. 2.50 Lakhs has been paid by the society from the Interest earned on Staff Welfare Fund/Deposit.
    Now, whether the said amount of Rs. 2.50 Lakhs can be exempt from payment of Income Tax under the provisions of Section 10(10)(iii) of the Income Tax Act. or any other provision is available to exempt. Pl Inform

  4. R.Soundararajan says:

    At the time of my retirement on 30.12.2017, I received Rs. 10,00,000 towards gratuity settlement. Subsequent to amendment in Gratuity Act , I received the enhanced gratuity amount during June 2018 after deduction of tax .Whether can I claim the refund of tax deducted at source on the enhanced gratuity amount while filing the IT return for the Assessment Year 2019-20

  5. ajay singh says:

    if leaving date 15 March 2018 and Gratuity paid in 2nd April 2018 the what will be the Gratuity Exemption limit. please suggest.

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