Gratuity received by PNB Employee rs. 10,00,000/- on retirement after 32 years of service. Is there any special exemption to PNB Emplyees for gratuity or the provisions of Gratuity Act 1972 will apply ? Is whole gratuity is exempt from tax>
15 July 2017
As per the provision of Income Tax Act. Any gratuity received by an employee of the Central Government, State Government or local authority, on death or retirement is fully exempt from tax.
15 July 2017
Any gratuity received by an employee of the Central Government, State Government or local authority, on death or retirement is fully exempt from tax.
I am confused from above replies. Because as per provisions there is a tax liability arising around Rs. 50,000/- otherwise no tax. Please clarify? Please mention any case law regarding this problem.
26 July 2024
For an employee of Punjab National Bank (PNB) receiving gratuity, it's essential to understand the tax implications based on the applicable provisions under the Income Tax Act and the Payment of Gratuity Act, 1972.
### **Tax Treatment of Gratuity for PNB Employees**
**1. **Exemption Limit under the Income Tax Act:**
- As per **Section 10(10)(ii)** of the Income Tax Act, 1961, gratuity received by an employee is exempt up to a certain limit. For employees of public sector undertakings (PSUs) or any government organization, this limit is generally up to ₹10 lakh. The remaining amount, if any, is subject to tax.
- Specifically, for PSU employees, including employees of Punjab National Bank (which is a PSU), the entire amount of gratuity up to ₹10 lakh is exempt from tax. Any gratuity received above ₹10 lakh is taxable.
**2. **Special Exemption for PNB Employees:**
- Since Punjab National Bank is a PSU and not a central or state government entity, the general exemption under **Section 10(10)(ii)** applies. This means that up to ₹10 lakh of gratuity received is exempt from tax, and any amount exceeding this limit is taxable.
- **Example:** If an employee of PNB received ₹10 lakh as gratuity, this entire amount would be exempt from tax. However, if the employee received ₹10,00,000 (₹10 lakh) as gratuity, which is above the exempt limit, the excess amount over ₹10 lakh will be taxable.
**3. **Application of the Gratuity Act:**
- The **Payment of Gratuity Act, 1972**, governs the provision and payment of gratuity, including eligibility and calculation. The Act provides for a maximum limit of gratuity payment and ensures that employees who qualify under the Act receive their dues.
- The provisions of the Gratuity Act ensure that employees receive gratuity payments as per the formula and eligibility criteria established under the Act, but they do not directly affect the tax exemption limits.
### **Summary**
- **For PNB Employees:** - Gratuity received is subject to tax exemptions under **Section 10(10)(ii)** of the Income Tax Act. - The exempt amount is up to ₹10 lakh. Any gratuity amount exceeding ₹10 lakh is taxable. - The **Payment of Gratuity Act** applies to the payment and calculation but does not alter the tax exemption limits.
### **Steps for Tax Filing:**
1. **Determine the Total Gratuity Amount:** - If the total gratuity amount received is ₹10 lakh or less, it is fully exempt. - If it exceeds ₹10 lakh, calculate the taxable portion (i.e., amount exceeding ₹10 lakh).
2. **Report on Income Tax Return:** - Report the total amount received. - Claim exemption up to ₹10 lakh under **Section 10(10)(ii)**. - Include any taxable portion in the total income and calculate tax accordingly.
By understanding these provisions, you can ensure correct reporting and compliance with tax regulations regarding gratuity received by employees of PSU organizations like PNB.
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