Example:-An employee of X Ltd. retires on 10th March, 2015 after service of 26 years and receives ₹ 6,50,000 as gratuity. X Ltd. is not covered by the Payment of Gratuity Act, 1972). If Salary drawn by him during 1st May 2014 and 28th February 2015 is as follows: 1st May 2014 to 31th December 2014 Rs. 26,000 p.m. 1st January 2015 to 28th February 2015 Rs. 26,500 p.m. Besides, he receives ₹ 400 p.m. as dearness allowance (forming part of salary for the computation of retirement benefits). He is also entitled to 6% commission on sales achieved by him (during 1st May 2014 and 28th February 2015, turnover achieved by the employee is ₹ 25,77,860). Is the entire amount of gratuity exempt from tax?
10 August, 2015
Contents
Plus +
Summary
Note
Bookmark
Share
✓ Copied successfully !
Print
Print Options
For full text, please login
Login to TaxTMI
Verification Pending
The Email Id has not been verified. Click on the link we have sent on
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 ... Summary
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.
Full Summary is available for active users!
Note: It is a system-generated summary and is for quick reference only.
TaxTMI 
TaxTMI 
