Hello everyone,
I want know what is the taxability of different retirement benefits, please explain in simple words,
1. PF
2. Grauity
In simple words,
1 gratuity
If you were govt employee then gratuity full exempt at the time of retirement
If you non govt employee then two criteria
(i) your company falls under gratuity act then your criteria will be
1.actual gratuity received
2.maximum rs. 2000000
3.15/26*last drawn salary*completed years of service
For completed years of service fraction in excess of six month consider as full year
Salary = basic dalary +DA
Least of the above will exempt
Exempt will be deducted from actual gratuity received = taxable
(ii) your company doesn't fall under gratuity act
1.actual gratuity received
2.max. Rs. 1000000
3.1/2*last 10 month avg. salary *complete years of service
For completed years of service ignore fraction
Least of above is exempted
Taxable = actual gratuity received - exempted
Salary=basic salary +DA+commission
2.PF
At the time of retirement pf will received accumulated
Accumulated pf include (contributions of employees +contributions of employer + interest on employee's contributions +interest on employer's contributions)
And also there is 3 type of pf - effect at the time if retirement
(i) statutory pf - exempted
(ii) recognised pf - exempted to certain condition
(iii) unrecognized pf - employer's contribution + interes thereon taxable
Employee's contributions not taxable
Interest thereon taxable if not taxed earlier
CAclubindia
