In exercise of the powers conferred by sub-section (2) of Section 1 of The Payment of Gratuity (Amendment) Act, 2010 (15 of 2010), the Central Government hereby appoints the 24th day of May, 2010, as the date on which the said Act shall come into force.
Gratuity Amount payable under Payment of Gratuity Act enhanced from Rs.3.5 lakhs to Rs 10 lakhs
Be it enacted by Parliament in the Sixty-first Year of the Republic of India as follows:-
Short title and commencement.
(1) This Act may be called the Payment of Gratuity (Amendment) Act, 2010.
(2) It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint.
Amendment of section 4 of Act 39 of 1972.
2. In section 4 of the Payment of Gratuity Act, 1972, in sub-section (3), for the words “three lakhs and fifty thousand rupees”, the words “ten lakh rupees” shall be substituted.
Tax Liabilty on Gratuity
As per Income Tax act ,Section 10(10),employees has been divided in three categorise.
- Employee of Central/State Government and Local bodies :Gratuity received by these employees is fully exempted without any limit.
- Employee covered under Payment of Gratuity Act: Amount received as per Gratuity Act is fully exempted .Means Income Tax has not defined /set any Limit for such employees.Means as soon as the amount of Gratuity Act ,enhanced ,Income tax Limit will also enhanced.As the income Tax act only refer the Payment of gratuity act .
- Other employee:For other remaining employee Limit is defined under the Income Tax act ,which is at present 3,50000.But many PSU ,which is not covered under the Sate or Central Govt definition as per sr number 1 and 2 above ,has started to pay ,gratuity as per Sixth pay commission ,maximum up to 10 lakh .So amount in excess of 3.5 lakh is taxable in hand of such employees .As the Limit is enhanced in Payment of Gratuity Act as per sr number 2 even then separate notification under this sub clause [10(10)(iii)} is required .The Limit is related to date of retirement /resignation and not to date of receipt.Update :Govt has enhanced the exemption limit for person retired after 24.05.2010 read more from here . .