CA Prashant Gupta (DGM (F & A)) (14068 Points)
05 February 2010Dear All
a employee died on Jan-10.
he was on higher post so his salary till Jan-10 is taxable.
Now company wants to pay gratuity. So it decided to pay gratuity in April-10
but gratuity is due in Jan-10
Please tell me whether gratuity will be taxable in current A.Y. or next A.Y.
Amir
(Learner)
(4016 Points)
Replied 05 February 2010
Dear Prashant,
Any death cum retirement gratuity received by Central and State Govt. employees, Defense employees and employees in Local authority shall be exempt u/s 10
In other cases if received by legal heirs then it is taxable under "income from other sources", since it is taxable under other sources where assesse has an option to offer his income to tax either on receipt basis or on accrual basis..
Therefore it is upto the assessee in which year it is to be taxed but exemption u/s 10 upto Rs, 3.50 lacs is available only in the year of receipt, therefore it should be offer to tax in FY 2010-2011 so that Exemption u/s 10 can be claimed
Sorabh Gupta
(Manager ( Taxation ))
(877 Points)
Replied 06 February 2010
Dear Prashant
As Salary becomes taxable on due basis.......Whether any salary is due but npt received then it will be taxable on due basis. So it is taxable in current A.Y.
Amir
(Learner)
(4016 Points)
Replied 06 February 2010
Dear Sorabh,
U r rite brother that Salary is taxable on receipt or due whichever is earlier basis. But in the present case gratuity is received by legal heirs, it won't be taxable under salary.
Had it been on retirement of the employee(i:e received by the employee himself & not by his legal heirs) then yes it would have been taxed in the year in which it became due.
CA lakshmikanth
(Chartered Accountant)
(238 Points)
Replied 06 February 2010
YES I AGREE WITH AMIR B UT LITTLE BIT CONFISUION U\S 10 EXEMPTION IS AVILIABLE ONLY CENTRAL AND STATE GOVT EMPLOYEES BUT IS IT APPLY LEGAL HEIRS ALSO
Max Payne
(employed)
(2574 Points)
Replied 06 February 2010
Nice question by lakshmikanth,,, is it not Death-cum-retirement gratuity of central and state govt employees.....? So it should be exempt under sec 10....
GIRISH JAYANTILAL JAIN
(Chartered Accountant in Practice)
(36 Points)
Replied 22 February 2010
an employee is retirng in March and will get gratuity in april
My question is
Gratuity will be taxaxble in the FY 09-10 or 10-11
Amir
(Learner)
(4016 Points)
Replied 22 February 2010
Dear Girish,
If it is received by employee then it has to be taxed in the year in which it is received or becomes due whichever is earlier........
So I think in ur case it's FY 2009-2010
CAclubindia
