Ad Free CAclubindia and Daily Updates on your Mobile. Subscribe Now!

gratuity

CA Mohit Agrawal (Chartered Accountant) (371 Points)

06 March 2010

can relief u/s 89(1) taken on gratuity after exemption u/s 10(10) is calimed ?

Thanks in Advance .............!

Reply
Follow
Share

6 Replies

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 06 March 2010

A relief can be claimed if gratuity is received in excess of the limits specified u/s 10(10). It can be claimed if service rendered is more than five years.

Method of computation of relief:

Compute the average rate of tax on the total income including the gratuity in the year of receipt.
Find out the tax on gratuity at the average rate of tax computed at (1) above.
Compute the average rate of tax by adding one – third of the excess gratuity to the other income of each of the three preceeding years. ( in case the service rendered is more than 5 years and less than 15 years, add one – half of the excess gratuity to the other income of each of the 2 preceeding years.)
Find out the average of the three rates (2 rates in case the service rendered is more than 5 years and less than 15 years) as computed in (3) above and compute the tax on gratuity at that rate.
The difference between the tax on gratuity computed at (2) and that at (4) will be the relief admissible u/s 89(1).