Employees covered under the gratuity law are now eligible to receive gratuity of up to Rs 10 lakh, as against an earlier specified statutory limit of Rs 3.5 lakh.
The higher limit of Rs 10 lakh would be allowed for all gratuity payments made on or after May 24, with the Centre specifying this date as the appointed date on which recent amendments to the Payment of Gratuity (Amendment) Act 1972 has come into force.
Parliament had in the recently concluded Budget session passed the Payment of Gratuity (Amendment) Act, 2010 to hike the gratuity payment limit to Rs 10 lakh.
Welcome change
The enhanced limit is likely to be a welcome change for millions of employees in Corporate India.
They may benefit with higher payout on account of enhanced payment ceiling as well as by way of reduced income tax burden, say tax experts.
“The hike in gratuity payment limit to Rs 10 lakh will certainly impact the income tax payout of the employees covered under the Gratuity law. It is more likely that their tax burden would be reduced because of this change,” Mr Vineet Agarwal, Senior Manager, BSR& Co, a firm of chartered accountants, told Business Line.
Under the Indian income tax law, gratuity received by an employee is taxable as salaries.
Employees receiving gratuity are categorised as Government employees, Non-Government employees covered under the Payment of Gratuity Act and Non-Government employees not covered under the Payment of Gratuity Act.
Based on this segregation, employees can claim necessary exemption.
Employees are eligible to receive gratuity only after rendering continuous service of five years.
This condition has been specified under the Payment of Gratuity Act. However, there could be exceptions in case of termination of employment due to disability or on account of death.
source; hindu
Leave a Reply