Is income tax payable on gratuity?
I want to know whether income tax is applicable for gratuity that i may get on superannuation.If any limit is there for tax excemption
Dont know nuttin bout no superannuation but in the US gratuities earned by service or work are considered ordinary income and subject to federal income tax(assuming Uncle Sam knows about them.)
10) 18(i) any death-***-retirement gratuity received under the revised Pension Rules of the Central Government or, as the case may be, the Central Civil Services (Pension) Rules, 1972, or under any similar scheme applicable to the members of the civil services of the Union or holders of posts connected with defence or of civil posts under the Union (such members or holders being persons not governed by the said Rules) or to the members of the all-India services or to the members of the civil services of a State or holders of civil posts under a State or to the employees of a local authority or any payment of retiring gratuity received under the Pension Code or Regulations applicable to the members of the defence services ;
(ii) any gratuity received under the Payment of Gratuity Act, 1972 (39 of 1972), to the extent it does not exceed an amount calculated in accordance with the provisions of sub-sections (2) and (3) of section 419 of that Act ;
(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month’s salary for each year of completed service20, 21[calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit22 as the Central Government may, by notification in the Official Gazette, specify in this behalf having regard to the limit applicable in this behalf to the employees of that Government] :
Provided that where any gratuities referred to in this clause23 are received by an employee from more than one employer in the same previous year, the aggregate amount exempt from income-tax under this clause 24[shall not exceed the limit so specified] :
Provided further that where any such gratuity or gratuities was or were received in any one or more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities was not included in the total income of the assessee of such previous year or years, the amount exempt from income-tax under this clause 24[shall not exceed the limit so specified] as reduced by the amount or, as the case may be, the aggregate amount not included in the total income of any such previous year or years.
Gratuity received by an employee on his retirement is taxable under the head salary whereas gratuity received by the legal heir of the deceased employee shall be taxable under the head 'Income from Other Sources'. The exemption is available u/s 10(10) to a certain limit.
For exemption purposes, the employees are divided into 3 categories :-
a. Govt. employees and employees of local authorities.
b. Employees not covered under the Payment of Gratuity Act, 1972
c. Other employees.
In the case of (a) above, nothing is taxable.
In the case of (b) above, an employee on the termination of his employment after he has rendered continuous service for not less than 5 years. The following is exempt :-
a) The amount of gratuity actually received.
b) 15 days salary for every completed year of service
c) Rs. 3,50,000
In the case of (c) above, exempt to the extent of minimum of following amounts :-
a) Actual amount of gratuity received
(b) Half month's average salary for every completed year of service
c) Rs. 3,50,000
Gratuity received in excess of the above exempt amount shall be included in his gross salary.
None of the retirement benefits are taxable.
If you re-invest it for profit, then it will be taxed.
