Gratuity limit

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Mohini (Querist)
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07 February 2011 Dear Sir,
One employee is working with our organisation for 12 years. At the time of his leaving i have calculated his gratuity as 15days pay for every one year complition of service. Which comes to 11.5 Lakhs.
As per it act limit for exemption is 10 Lakh.
My question is whether employer is obligated to pay only till 10 Lakhs or as per gratuity act he has to pay 11.5 Lakhs out of which 10L will be non taxable for employee.

Thanks
Mohini

Sunil Kr. Sanganeria

Sunil Kr. Sanganeria (Expert)
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07 February 2011 Employer liability is limited to the extent of gratuity payable as per Gatuity ACt. A employer can pay any amount as an exgratia over and above the amount calculated as per Payment of Gratuity ACt. The excess amount paid to employee is taxable in the hands of the employee.

Mohini

Mohini (Querist)
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07 February 2011 Thanks Sir,

Please guide if any employer wants to restrict the amt payable to 10 Lakhs even if as per gratuity act calculation is more. Can it be possible.

Regards
Mohini

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Sunil Kr. Sanganeria

Sunil Kr. Sanganeria (Expert)
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08 February 2011 Yes, Employer is bound to pay only as per Payment of Gratuity Act