Is gratuity payment of 9 years taxable

579 votes

Hi, In your case, Need to know the Status of Company eg Govt or Private.
In general, In case of government employees there is no tax on the gratuity.
In case of private sector employees, if they are covered under the Payment of Gratuity Act, 1972, then the gratuity is exempt from tax subject to a maximum of Rs 10 lakh or 15 days salary for each completed year of service (or part thereof).

Advocate Deepak Gandhi LawRato

965 votes

Dear Client,

1) There are two types of Employee- (i) Employee Covered under Payment of Gratuity Act, 1972 (ii) Employee not covered under Payment of Gratuity Act, 1972.
2) If you are covered under Payment of Gratuity Act then you will get exemption only when following conditions are met: (i) Statutory limit of Rs 10 lakh. (Maximum limit / Govt notified amount) (ii) Last drawn salary * 15/26 * No. of completed years of service (iii) Actual Gratuity received by you. If the gratuity exceeds these limits, then it becomes taxable.
3) If you are not covered under Payment of Gratuity Act then you will get exemption only when following conditions are met: (i) Statutory limit of Rs.10 lakhs. (ii) Gratuity = Average salary x ½ x No. of years of service. (iii)Actual gratuity received by you.
4) Completion of five years with company is necessary in order to receive gratuity benefits. In case of company "X", you are entitled to receive. But in case of company "y" you may not be entitled. Therefore in order to receive gratuity from company "y", you will have to prove that company "x" and "y" are same legal entity.
All the Best!

Advocate Prabhanshu Shukla LawRato

794 votes

As per the income tax act 1961, The gratuity is taxable if the employee had not worked at least 5 years form the date of joining. The gratuity is also not taxable in case of government employee, not disclosed in question.

While your employer is same and company is merged into another company. So you can ask your employer for the gratuity and it would be taxable as per the law:
15 days salary based on the salary last drawn for every completed year of service or part thereof in excess of 6 months. Therefore the amount that shall be exempt from total Gratuity paid is calculated as
last drawn salary x number of years in employment x 15/26.

Last drawn salary is Basic salary and DA. Number of years in service is rounded off to the nearest full year.
Regards
Adv Rajul Jain
9818036919

Advocate Rajul Jain LawRato