Tax on gratuity: The central government, under the 7th pay commission, has increased the amount of gratuity along with many allowances for central employees. Following this increase by the government, employees are now busy calculating how much tax would have to be paid on it. It is also a big may. Let’s know about this with details in the news.
The Confusion Among The Following Employees-
With the government announcing an increase of gratuity limit for government employees to Rs 25 lakh, central employees are desperately trying to know whether the gratuity will be taxable or not. Different rules apply to these private employees.
Upgradation Of Gratuity Limit Last Year-
At the time of implementing the recommendations of the 7th pay commission, raising the gratuity limit was also recommended simultaneously. The Central government fixed the gratuity ceiling of government employees at Rs 25 lakh on 1st January, 2024. This limit was previously Rs 20 lakh. However, this limit was raised by the government as per the recommendations of the 7th Pay Commission. A circular had been issued in this connection on May 30 last year.
Tax Charged On Gratuity
The gratuity amount is given to the retired government employee in his account. They are totally exempt from tax on the gratuity money. This amount of gratuity, a maximum of Rs. 25 lakhs, will be extended to government employees even in the event of death while on duty. This gratuity amount is 100 percent exempt from income tax. This essentially means that a government employee will not have to pay any tax on gratuity amounts received by him up to Rs. 25 lakhs.
Gratuity Exemption Limit
Different rules of gratuity exist in the private and public sectors. In the private sector, gratuity is capped at Rs 20 lakh. Currently, gratuity is set at Rs 25 lakh for government employees. For that amount, private employees do not get tax exemption. This enunciates that private employees will be eligible for taxation on gratuity payment of Rs 20 lakh and any gratuity payment by government employees up to Rs 25 lakh will not be taxed.
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