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Are retirement benefits like PF and Gratuity taxable? ​

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 preetham asked over 2 years ago

Hi I want to know, Are retirement benefits like PF and Gratuity taxable? ​​

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4 Answers
Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 veeru answered about 2 years ago

In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard

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Open uri20170510 32134 1c996lj?1494421732 Anil answered over 2 years ago

Gratuity [Section 10(10)]: Any death cum retirement gratuity received by Central and State Govt. employees, Defense employees and employees in Local authority shall be fully exempt. Any gratuity received by persons covered under the Payment of Gratuity Act, 1972 shall be exempt subject to following limits:- For every completed year of service or part thereof, gratuity shall be paid at the rate of 15 days' salary based on the salary last drawn by the concerned employee. Salary for this purpose will include basic salary and dearness allowance only. 15 days salary is to be computed by the formula 15 days' salary = Salary last drawn x 15/26. The amount of gratuity as calculated above shall not exceed Rs. 10,00,000/-. In case of any other employee, gratuity received shall be exempt, subject to the following exemptions Exemption shall be limited to 15 day salary (based on last 10 months average salary*) for each completed year of service or Rs. 10,00,000/- whichever is less. While computing year of service, any fraction of year is to be ignored. Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee. * Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month (not the day) of retirement. Where the gratuity was received in any one or more earlier previous years also and any exemption was allowed for the same, then the exemption to be allowed during the year gets reduced to the extent of exemption already allowed, the overall limit being Rs. 10,00,000/-. The exemption in respect of gratuity is permissible even in cases of termination of employment due to resignation. The taxable portion of gratuity will quality for relief u/s 89(1). Gratuity payment to a widow or other legal heirs of any employee who dies in active service shall be exempt from income tax.

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Picsjoin 2017224123730582 Archana answered over 2 years ago

Hie Preetham, ​​- In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PF receipts are exempt from tax, if the same are received from a recognised PF after rendering continuous service of not less than 5 years.​

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 CA Sandeep Bohra answered over 2 years ago

Dear friend, --In the hands of a Government employee Gratuity and PF receipts on retirement are exempt from tax. -- In the hands of non-Government employee, gratuity is exempt subject to the limits prescribed in this regard and PF receipts are exempt from tax, if the same are received from a recognised PF after rendering continuous service of not less than 5 years.​

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