GRATUATY FOR PSU

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

21 July 2010 Hi,

One of my client, retired from Food corporation for india on 31Oct 2009.

The total gratuity payable would be aprox 6.5lakh.

As per the FCI officials,the payable amount is taxable under IT act,1961 after deducting 3.5 lakh exemption limit.

My question is this, as per the latest govt notification the expemption limit extended to 10lakhs.

Can u please confirm whether this extention of 10 lakh is for only specified establishments.

Please note that Food corporation of india is an PSU..

Appreciate if you guys response as early as possible.

Thanks,
Anil

srinath

srinath (Expert)
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22 July 2010 the gratuity for the period 2009-2010 would be 3.5 lakhs only

Querist : Anonymous

Querist : Anonymous (Querist)

22 July 2010 as per the new notification the gratuity exemption extended to Rs10lakh effective from 24 May 20101.

Please give me the solution .

Thanks for quick response,

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srinath

srinath (Expert)
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23 July 2010 ya but the client retired on 31st oct 2009....

Querist : Anonymous

Querist : Anonymous (Querist)

23 July 2010 As per you, client is not eligible because he is retired before 24th may 2010 and also note that it doesnt matter whether it is PSU OF govt concern....

Is it correct ?

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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26 July 2024 The taxation of gratuity and the applicability of exemption limits are guided by the provisions of the Income Tax Act, 1961. Here’s a detailed explanation regarding the taxation of gratuity and the impact of the exemption limit:

### **Gratuity Exemption Limits:**

1. **Old Provision (before 24th May 2010):**
- Under the Income Tax Act, prior to the amendment on 24th May 2010, the maximum exemption limit for gratuity was ₹3.5 lakh.

2. **Amendment Post 24th May 2010:**
- After the amendment on 24th May 2010, the exemption limit for gratuity was increased to ₹10 lakh. This increase in exemption limit applies to all employees, including those working in Public Sector Undertakings (PSUs), government departments, and private sector organizations.

### **Applicability Based on Retirement Date:**

- **For Retirement Before 24th May 2010:**
- If an employee retired before 24th May 2010, the old exemption limit of ₹3.5 lakh would apply. This means the gratuity payable is exempt up to ₹3.5 lakh, and any amount exceeding this limit would be taxable.

- **For Retirement After 24th May 2010:**
- For employees retiring on or after 24th May 2010, the increased exemption limit of ₹10 lakh applies.

### **Specific Case:**

Given that your client retired on 31st October 2009, the retirement date falls before the amendment of 24th May 2010. Therefore, the exemption limit of ₹3.5 lakh would apply in this case. The increase to ₹10 lakh would not apply as the retirement occurred before this date.

### **Summary:**

Since your client retired from the Food Corporation of India (FCI) before 24th May 2010, the exemption limit of ₹3.5 lakh is applicable. The increase to ₹10 lakh applies only to those who retired on or after 24th May 2010.

### **Steps to Take:**

1. **Calculate Taxable Gratuity:**
- Gratuity payable: ₹6.5 lakh
- Exemption limit: ₹3.5 lakh
- Taxable Gratuity: ₹6.5 lakh - ₹3.5 lakh = ₹3 lakh

2. **Tax Calculation:**
- The taxable amount of ₹3 lakh will be added to the retiree’s income and taxed according to the applicable income tax slabs.

### **No Specific Exceptions for PSUs:**

The increased exemption limit is uniformly applicable and not restricted to any specific type of establishment. However, for employees retiring before the cut-off date, the old limit prevails irrespective of whether the employer is a PSU or private sector entity.

If you have any further questions or need additional clarification, feel free to ask!