Jayakumar Gnanasundaram (Accountant) (48 Points)
15 June 2018One of our company staffs retired on 30/06/2017. His Gratuity on retirement is Rs 16 lakhs. (Payment of Gratuity Act is applicable for us). Now as per the latest amendment and notification dt 29/03/2018, the exemption limit for the Gratuity is increased to Rs 20 lakhs. I want to know, whether the above referred staff can claim this Gratuity exemption of Rs 20 lakhs in the Assessment Year 2018-19
Please help to sort out this
Regards
Jayakumar
Siddharth Goel
(Chartered Accountant)
(3031 Points)
Replied 15 June 2018
Hi,
The notification released by the Government is applicable from the Date of Notification itself i.e. 29th March 2018.
As the gratuity received shall be shown in the ITR for AY 2018-19, hence the employee can claim the benefit of the notification while filing ITR of the current assessment year i.e. 2018-19.
Dipika Shah
(Partner)
(188 Points)
Replied 15 June 2018
The company is covered under payment of gratuity act then section 10(10)(ii) of the Income Tax Act will apply. As per which gratuity received will be exempt if It is received as per Section 4(2) and 4(3) of the Gratuity Act which is explained below:
The gratuity will be exempt least of the following:
15/26 * Last drawn salary * every completed year of service ( or part thereof in excess of six months) [i.e. the gratuity amount computed in terms of section 4(2)of the Payment of Gratuity Act, 1972]
So please compute gratuity as per section 4(2) of payment of gratuity Act as well, and least of the above will be exempt.
Notification under payment of gratuity Act is in force from 29/03/2018
I got retired in July 2017 from pvt ltd company and gratuity of 19 lac was settled in aug 2017. During online chat with income tax expert on govt of India income tax website I was replied that 20 lac limit tax exemption is applicable for gratuity paid 29/03/2018 onward.
So can you please reconfirm as it contradicts your views on similar case.
Mukund Athavale
Dipika Shah
(Partner)
(188 Points)
Replied 18 July 2018
The view do not contradicts. As replied earlier as well, the notification of gratuity is dated 29/03/2018 which is in force from 29/03/2018 and onwards. Gratuity received in August 2017 the limit is 10 lakhs and not 20 lakhs.
The above query for company has not mentioned actual payment date, only retirement date is mentioned. Hence, accordingly the reply is given which clearly mentions that notice is in force from 29/03/2018.
JAYANTHRAM
(DIRECTOR)
(22 Points)
Replied 06 November 2018
Regarding Gratuity, The Ministry of Employment and labour notification dated 29th March 2018, says:
New Delhi, the 29th March, 2018
S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity
Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee
under the said Act shall not exceed twenty lakh rupees.
But,Section 4(5) of Payment of Gratuity Act 1972, which says:
“4(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer”
This clause remains.
QUESTION 1:
Is it not discriminatory to employees who retired just before 29.3.18 as the announcement was made several months earlier?
QUESTION 2:
The Government limit was always for TAX FREE gratuity. But most companies are misinterpreting the wording of the 29.3.18 amendment and disregarding section 4(%) that remains and insisting that they cannot pay more than 10 lakhs (increased to 20 lakhs now). Is higher payment based on appointment conditions legal now?
A.P.Jayanthram
Regarding Gratuity, The Ministry of Employment and labour notification dated 29th March 2018, says:
New Delhi, the 29th March, 2018
S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity
Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee
under the said Act shall not exceed twenty lakh rupees.
But,Section 4(5) of Payment of Gratuity Act 1972, which says:
“4(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer”
This clause remains.
QUESTION 1:
Is it not discriminatory to employees who retired just before 29.3.18 as the announcement was made several months earlier?
QUESTION 2:
The Government limit was always for TAX FREE gratuity. But most companies are misinterpreting the wording of the 29.3.18 amendment and disregarding section 4(%) that remains and insisting that they cannot pay more than 10 lakhs (increased to 20 lakhs now). Is higher payment based on appointment conditions legal now?
A.P.Jayanthram
Regarding Gratuity, The Ministry of Employment and labour notification dated 29th March 2018, says:
New Delhi, the 29th March, 2018
S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity
Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee
under the said Act shall not exceed twenty lakh rupees.
But,Section 4(5) of Payment of Gratuity Act 1972, which says:
“4(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer”
This clause remains.
QUESTION 1:
Is it not discriminatory to employees who retired just before 29.3.18 as the announcement was made several months earlier?
QUESTION 2:
The Government limit was always for TAX FREE gratuity. But most companies are misinterpreting the wording of the 29.3.18 amendment and disregarding section 4(%) that remains and insisting that they cannot pay more than 10 lakhs (increased to 20 lakhs now). Is higher payment based on appointment conditions legal now?
A.P.Jayanthram
Regarding Gratuity, The Ministry of Employment and labour notification dated 29th March 2018, says:
New Delhi, the 29th March, 2018
S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity
Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee
under the said Act shall not exceed twenty lakh rupees.
But,Section 4(5) of Payment of Gratuity Act 1972, which says:
“4(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer”
This clause remains.
QUESTION 1:
Is it not discriminatory to employees who retired just before 29.3.18 as the announcement was made several months earlier?
QUESTION 2:
The Government limit was always for TAX FREE gratuity. But most companies are misinterpreting the wording of the 29.3.18 amendment and disregarding section 4(%) that remains and insisting that they cannot pay more than 10 lakhs (increased to 20 lakhs now). Is higher payment based on appointment conditions legal now?
A.P.Jayanthram
Regarding Gratuity, The Ministry of Employment and labour notification dated 29th March 2018, says:
New Delhi, the 29th March, 2018
S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity
Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee
under the said Act shall not exceed twenty lakh rupees.
But,Section 4(5) of Payment of Gratuity Act 1972, which says:
“4(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer”
This clause remains.
QUESTION 1:
Is it not discriminatory to employees who retired just before 29.3.18 as the announcement was made several months earlier?
QUESTION 2:
The Government limit was always for TAX FREE gratuity. But most companies are misinterpreting the wording of the 29.3.18 amendment and disregarding section 4(%) that remains and insisting that they cannot pay more than 10 lakhs (increased to 20 lakhs now). Is higher payment based on appointment conditions legal now?
A.P.Jayanthram
Regarding Gratuity, The Ministry of Employment and labour notification dated 29th March 2018, says:
New Delhi, the 29th March, 2018
S.O. 1420 (E).—In exercise of the powers conferred by sub-section (3) of section 4 of the Payment of Gratuity
Act, 1972 (39 of 1972), the Central Government hereby specifies that the amount of gratuity payable to an employee
under the said Act shall not exceed twenty lakh rupees.
But,Section 4(5) of Payment of Gratuity Act 1972, which says:
“4(5) Nothing in this section shall affect the right of an employee to receive better terms of gratuity under any award or agreement or contract with the employer”
This clause remains.
QUESTION 1:
Is it not discriminatory to employees who retired just before 29.3.18 as the announcement was made several months earlier?
QUESTION 2:
The Government limit was always for TAX FREE gratuity. But most companies are misinterpreting the wording of the 29.3.18 amendment and disregarding section 4(5) that remains and insisting that they cannot pay more than 10 lakhs (increased to 20 lakhs now). Is higher payment based on appointment conditions legal now?
Jayanthram
CAclubindia
