Limit of Exemption of Gratuity under Income Tax Act

[rajesh marwaha]

What is the limit of Exemption of Gratuity under Income Tax Act in the case of Gratuity received by employee after regular retirement of PUBLIC SECTOR UNDERTAKING (e.g. NTPC). Is there any recent change in this provision?

[Surender Gupta]

Section 10(10)is applicable to provide exemption in respect of gratuity. In case of government employees, full exemption is there in resepect of gratuity. An employee of PSU can not be held as members of civil services of Union and therefore covered by the provisions of Payment of Gratuity Act, 1972 (39 of 1972). And therefore, he is eligible for exemption to the extent t does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 4 of that Gratuity Act.

AI Summary

Gratuity exemption: public sector employees qualify only for exemption up to the amount calculable under gratuity law. Section 10(10) of the Income Tax Act provides exemption for gratuity; government employees receive full exemption. Public sector undertaking employees are covered by the Payment of Gratuity Act, 1972 and are eligible for exemption only to the extent the gratuity does not exceed the amount calculated under the Act's provisions corresponding to subsections (2) and (3) of section 4.