Time period - payment of gratuity

[Rahul Bagaria]

Is gratuity paid on completion of 2 years of service entirely taxable, if no what is the amount of exemption. The company is not covered under the payment of grautity act.

[Rama Krishana]

Section 10(10) of the income tax act, does not provide any specific minimum period to be served for getting entitlement of exemption in case of gratuity. Once the person is getting gratuity at time of retirement, death etc. he is eligible for exemption. But if he is getting gratuity during the tenure or continuance of employment, he can not avail the benefit.

AI Summary

Gratuity tax exemption applies when gratuity is paid on retirement or death, not for payments during employment. Section 10(10) contains no minimum service requirement for gratuity exemption; exemption depends on timing and cause of payment, applying where gratuity is paid on retirement or death, and excluding gratuity paid during the continuance of employment, which is taxable.