Commuted pension tax treatment: part exempt, part taxable; exemption reduced where gratuity is received. Uncommuted pension is fully taxable as salary; commuted pension is partly exempt and partly taxable. Compute a notional full pension value from the commuted payment and apply an exemption fraction: if no gratuity is received, one half of the notional full pension value is exempt; if gratuity is received, one third is exempt. The remainder of the commuted payment is chargeable to tax as salary and must be added to taxable uncommuted pension to determine total taxable pension income.
Gratuity exemption: least of three test determines exempt portion for noncovered employers; excess gratuity is taxable. Gratuity from a noncovered employer is exempt to the extent of the least of three amounts: the service based fraction computed from the average monthly salary (which includes basic pay, one month's dearness allowance, and average monthly commission), the statutory monetary ceiling, and the gratuity actually received; any excess over that exempt amount is taxable.
Gratuity exemption: part determined by 15 days salary times completed years, excess treated as taxable salary. Gratuity exemption is determined by taking the least of: the product of 15 days' salary and completed years of service, the statutory ceiling, and the gratuity received. Completed years may be rounded to include qualifying months. The exempt portion is that least amount; any excess over the exempt amount is taxable as salary income in the assessment year.
Gratuity exemption under Section 10(10)(i) remains available even if retiree accepts private sector employment after retirement. Gratuity paid to a government employee on retirement is fully exempt from income tax under the governing gratuity exemption provision, and that exemption remains available even if the retiree subsequently accepts employment in the private sector.
Comparison of section 298 "Levy of interest and penalty in certain cases." between the Income-Tax Act, 2025 (as passed) and the Income-Tax Bill, 2025 (as originally introduced)
10 September, 2025
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Levy of interest and penalty in search cases: interest accrues and an administrative penalty may attach to undisclosed income when returns are not furnished. Where a return required by a search notice is not filed, the provision charges interest on tax determined in the search assessment for the period from the ... Summary
Levy of interest and penalty in search cases: interest accrues and an administrative penalty may attach to undisclosed income when returns are not furnished.
Where a return required by a search notice is not filed, the provision charges interest on tax determined in the search assessment for the period from the day after the notice deadline until assessment completion, and permits an administrative penalty measured by reference to the tax leviable on undisclosed income determined in that assessment. A conditional bar prevents penalty for the block period if the return is filed, tax is paid with evidence, and no appeal is filed against the returned portion; any undisclosed income in excess of declared amounts remains penalizable. Procedural safeguards include a hearing, higher level approval for large penalties, and specified limitation and exclusion rules.
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