LONG TERM SERVICE AWARD TAXABILITY

[Mahendra L]

Kindly clarify about the following as I got two different rules as per I.T.Act 1961. (i.e) one from I.T Circular and another one from I.T.Manual

As per circular: For gift received in Cash / cheque from Employer is taxable in the hands of employee. Say, ₹ 50,000/- received by employee from Employer in the form of Cheque as 10 YEARS SERVICE AWARD.

As per I.T.Manual: For gift received in cas/ cheque exceeds ₹ 5,000/- is taxable. So, in this case, taxable will be

RS.45,000 (i.e. ₹ 50,000-RS.5,000)

Kindly clarify and state me the correct rules to be followed.

Thanks

Regards,

Mahindran.

AI Summary

Clarification sought on taxability of long-term service awards under Income Tax Act, 1961; conflicting circular and manual. A query was raised regarding the taxability of long-term service awards under the Income Tax Act of 1961. The individual received conflicting information from an Income Tax Circular and the Income Tax Manual. According to the circular, any cash or cheque gift from an employer is taxable for the employee. In contrast, the manual states that only amounts exceeding 5,000 are taxable. The individual received 50,000 as a service award and seeks clarification on whether the taxable amount is the full 50,000 or only 45,000, after excluding the non-taxable 5,000.