Mohan, retried from Y & Company Ltd. on 31-08-2018 after rendering services for 31 years and 7 months. He was paid ` 11 lakhs as gratuity under the Payment of Gratuity Act, 1972. His last drawn salary details are- basic salary ` 32,000, dearness allowance ‘30,000 (40 percent for retirement benefits). Calculate his taxable gratuity?
Answers
Mohan's gratuity is non-taxable.
Explanation:
Given: Mohan, retried from Y & Company Ltd. on 31-08-2018 after rendering services for 31 years and 7 months. He was paid ` 11 lakhs as gratuity under the Payment of Gratuity Act, 1972. His last drawn salary details are- basic salary ` 32,000, dearness allowance ‘30,000 (40 percent for retirement benefits).
Find: Taxable gratuity.
Solution:
Years of service = 31
So gratuity would be subject to maximum of 33 times of emoluments.
Gratuity = Rs. 11 Lakhs.
Gratuity is a benefit given by the employer to employees.
A recently approved amendment by the Government of India has increased the maximum limit of gratuity that is tax exempt to Rs. 20 lakh from the previous ceiling of Rs. 10 lakh, which comes under Section 10(10) of the Income Tax Act.
So Mohan's gratuity is non-taxable.