gratuity
This query is : Resolved
28 September 2016
an employee of psu bank is about to get 18 lakh as gratuity, is gratuity total amount exempt or only up to 10 lakh,?? if taxable above 10 lakh, what's the percentage for govt employees???
26 July 2024
For an employee of a Public Sector Undertaking (PSU) Bank receiving gratuity, here’s how the tax treatment applies:
### **1. Exemption Limit for Gratuity**
Under **Section 10(10)(ii)** of the Income Tax Act:
- **Exemption Limit:** The exemption for gratuity is up to ₹20 lakh (from FY 2020-21 onwards). For previous years, the exemption limit was ₹10 lakh.
**This exemption limit applies to all employees, including those working for PSUs.**
### **2. Tax Treatment**
**a. Gratuity Received Up to ₹20 Lakh:**
- The amount of gratuity up to ₹20 lakh is fully exempt from tax.
**b. Gratuity Received Above ₹20 Lakh:**
- If the gratuity received exceeds ₹20 lakh, the excess amount is subject to tax.
### **3. Taxable Amount Calculation**
For the scenario where the gratuity received is ₹18 lakh:
- **Exempt Amount:** Since ₹18 lakh is less than ₹20 lakh, the entire amount of ₹18 lakh is exempt from tax.
- **Taxable Amount:** In this case, there is no taxable amount because the gratuity amount falls within the exemption limit.
### **4. Tax Rate on Excess Amount**
Since the total gratuity of ₹18 lakh is below the exemption limit of ₹20 lakh, there is no tax liability on the gratuity in this case. However, if the gratuity had been above ₹20 lakh:
- The excess amount over ₹20 lakh would be taxed according to the applicable tax slab rates based on the individual's total income.
### **5. Summary**
- **For Gratuity Up to ₹20 Lakh:** The entire amount is exempt from tax.
- **For Gratuity Above ₹20 Lakh:** Only the amount exceeding ₹20 lakh is taxable.
**No specific percentage rate applies to government employees differently than other employees; the tax rate would be based on the individual's total income and applicable income tax slabs.**
### **References:**
1. **Income Tax Act, 1961** - Section 10(10)(ii) for gratuity exemption.
2. **Finance Act Updates** - For the latest exemption limits and any changes.
By ensuring you stay within the exemption limit or correctly calculating tax on any excess amount, you can manage the tax implications of gratuity payments effectively.
### **1. Exemption Limit for Gratuity**
Under **Section 10(10)(ii)** of the Income Tax Act:
- **Exemption Limit:** The exemption for gratuity is up to ₹20 lakh (from FY 2020-21 onwards). For previous years, the exemption limit was ₹10 lakh.
**This exemption limit applies to all employees, including those working for PSUs.**
### **2. Tax Treatment**
**a. Gratuity Received Up to ₹20 Lakh:**
- The amount of gratuity up to ₹20 lakh is fully exempt from tax.
**b. Gratuity Received Above ₹20 Lakh:**
- If the gratuity received exceeds ₹20 lakh, the excess amount is subject to tax.
### **3. Taxable Amount Calculation**
For the scenario where the gratuity received is ₹18 lakh:
- **Exempt Amount:** Since ₹18 lakh is less than ₹20 lakh, the entire amount of ₹18 lakh is exempt from tax.
- **Taxable Amount:** In this case, there is no taxable amount because the gratuity amount falls within the exemption limit.
### **4. Tax Rate on Excess Amount**
Since the total gratuity of ₹18 lakh is below the exemption limit of ₹20 lakh, there is no tax liability on the gratuity in this case. However, if the gratuity had been above ₹20 lakh:
- The excess amount over ₹20 lakh would be taxed according to the applicable tax slab rates based on the individual's total income.
### **5. Summary**
- **For Gratuity Up to ₹20 Lakh:** The entire amount is exempt from tax.
- **For Gratuity Above ₹20 Lakh:** Only the amount exceeding ₹20 lakh is taxable.
**No specific percentage rate applies to government employees differently than other employees; the tax rate would be based on the individual's total income and applicable income tax slabs.**
### **References:**
1. **Income Tax Act, 1961** - Section 10(10)(ii) for gratuity exemption.
2. **Finance Act Updates** - For the latest exemption limits and any changes.
By ensuring you stay within the exemption limit or correctly calculating tax on any excess amount, you can manage the tax implications of gratuity payments effectively.
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