SUMMARY OF CASE LAW
The Income-tax Act exempts the gratuity amount to the extent of limit prescribed under the said Act; there is no distinction between the gratuity paid under the Payment of Gratuity Act, 1972 or otherwise
CASE LAW DETAILS
Decided by: HIGH COURT OF KARNATAKA, In The case of: North West Karnataka Road Transport Corporation v.Deputy Labour Commissioner, Appeal No.: Writ Petition No. 5759 of 2006, Decided on: February 25, 2008
RELEVENT PARAGRAPH
No doubt, section 192 of the Income-tax Act requires the employer to deduct the income-tax from the salary and the salary is defined under section 17 of the Income-tax Act, which includes wages, any annuity or pension, any gratuity, any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages, any advance of salary and other payments. However, section 10 of the Income-tax Act excludes certain amounts to be included in the total income. Section 10 sub-section (10) deals with the exclusion of the gratuity amount from the total income. The relevant provision for the purpose of this case is, section 10 sub-section (10) clause (iii) of the Income-tax Act, which reads as under :
“10.(10)(iii) any other gratuity received by an employee on his retirement or on his becoming incapacitated prior to such retirement or on termination of his employment, or any gratuity received by his widow, children or dependants on his death, to the extent it does not, in either case, exceed one-half month’s salary for each year of completed service, calculated on the basis of the average salary for the ten months immediately preceding the month in which any such event occurs, subject to such limit as the Central Government may, by notification in the Official Gazette, specify in this behalf paying regard to the limit applicable in this behalf to the employee of that Government”.
By a reading of this provision, it is clear that, in all the cases of payment-of gratuity, an exclusion of gratuity amount is given from the total income, i.e., excluding the gratuity from the payment of tax to the extent of limit prescribed by notification issued in this behalf by the Central Government. It also makes it clear that the notification will be on par with the employees of the Government. It is brought to my notice that, by notification dated September 24,1997, the Central Government has fixed the limit of exclusion of gratuity to the extent of Rs. 3.5 lakhs from the purview of the total income. If the gratuity is payable under the provisions of the Act the protection is given to the gratuity under section 13 of the said Act, inter alia, no gratuity payable under this Act and no gratuity payable to an employee in any establishment, factory, mine, oilfield, plantation, port, railway company or shop exempted under section 5 shall be liable to attachment in execution of any decree or order of any civil, revenue or criminal court. This also makes it clear that the protection is given against the attachment, even for recovery of the revenue also. The Income-tax Act also excludes the gratuity amount from the total income up to the limit fixed. The contention of the learned counsel for the Corporation that, it is only in respect of payment of gratuity under the Act and not under the Regulations, I find that such a contention is not tenable and is not in consonance with the provisions of the Income-tax Act. The Income-tax Act excludes the gratuity amount to the extent of limit prescribed under the Income-tax Act. Hence, the deduction of income-tax by the Corporation is per se contrary to the provisions of section 10 sub-section (10) clause (iii) of the Income-tax Act. There is no distinction between the gratuity paid under the Act or otherwise. Accordingly, the contention that the gratuity amount is also liable for income-tax is rejected.
is gratuity amendment relevent for ipce nov 2010?
HI
need more detail on summary of payment of gratuity act 1972 and supreme court judgement on pension in lieu of gratuity on 14th aug 2010
what is the gratuity payable by central govt. psus and also want to know its effective date. also pl share the details on why retired employees from 2006 does not come under gratuity act 2010
please provide the summary of payment of gratuity act, 1972 and supreme court judgement on pension in lieu of gratuity on 14th aug 2010 or relevant case law paragraphs on supreme court on gratuity case on 17th aug 2010
thanks for update on gratuity act 2006. need PDF file of Gratuity details
Also please update on latest of dpe circular for revised gratuity in PSU’s and let me know the reason on why retired employees from 2006 does not come under gratuity act 2010
thanks for sharing details on Gratuity Payment under the Payment of Gratuity Act, 1972 or otherwise Exempt to the Extent Covered under the Income Tax Act
can u please share summary of payment of gratuity act 1972 and supreme court judgement on allahabad bank gratuity case on 17th aug also are their are any changes in effective date of gratuity act
thanks for providing notification on gratuity act amendment 2010 and gratuity act 2006
please share the effective date of gratuity for govt. retired psu employees. can i get all details of gratuity in pdf format
thanks for sharing the details on deductions under payment of gratuity amount. nice & relevant data on Gratuity Payment under the Payment of Gratuity Act, 1972
Thanks for sharing the details on Gratuity Payment under the Payment of Gratuity Act, 1972 or otherwise Exempt to the Extent Covered under the Income Tax Act and the relevant case law paragraphs
i also need
* all details on gratuity to central govt employees
* sa gratuity payment, and
* valuation of residential accommodation provided by psu to its employees
Differenciating between a govt. employee and cpstu employee inrespect payment of gratuity upto Rs 10 lac is against principle of natural justice and any retiree can challeange the notification under article 226 of the constituition of india, but in india legal battle is costly and time consuming.After all one can save Rs1 to 2 lac by way of tax for the balance amount 3to 5lac who have retired before 21-5-2010.I earenstly appeal to the chief justice of india to take up this issue with union of india on behalf of public sector retirees between 1-1-2007 and21-5 2010–p gopal shastry post borimar, via, mani 574253
Th last para should be read as “Can someone suggest an appropriate forum through which this irrational act can be taken forward?
As per fundamental rights conferred by the constitution, all are equal including the rate of income tax or any other taxes applicable irrespective of the fact whether one is working in the government sector, PSU, Banks, private sector etc. However, the present government treats the employees in the government sector as a priviledged class and hence the increased rate of gratuity amount of Rs:10.0 lacs is applicable with effect from 1.6.2006. However, for others, the effective date is 24.5.2010. If all are equal, then why an employee worked and retired from government sector between 1.6.2006 to 23.5.2010 is entited for a gratuity of Rs:10.0 lacs whereas a citizen worked and retired from other sectors during thes same period is eligible for Rs:3.5 lacs. Does this has any logic? Can the labour minister Mr Karge explain this to empolyees retired from 1.6.2006 to 23.5.2010. Can someone suggest an appropriate forum through which this irration act can be taken forward?
Injustice to PSU Officers in Gratuity payment:-Gratuity of 10 lakhs paid to Psu officers between 1/1/07 to 31 mar 2010 is being taxed at full rate where as the govt officers are getting it tax free. Please look into the same as both are serving the govt equally.
The Central PSU OFFICERS RETIRING AFTER 1/1/07 HAVE BEEN PAID THE INCREASED GRATUITY AMOUNT OF RS 10 LAKHS, However, the tax amounting to~ 2 lakhs have been deducted from this amount .
The central govt employees( effective date1/1/06) as well as those retiring in may2010 will get the enhanced amount tax free.
Are the concern officers issuing notifications ,unaware of the limit being increased in the past for these CPSU and accordingly they should have addressed their case first for providing the tax benefits on the increased amount?
Such is the mind set of our officers!
Sad!!!!
It is most unfortunate that we the retirees of Central GOVT. CPSU’s working under the guidelines of the DPE have come in for a rude shock. The Govt. initially approved the 2nd pay revision on 26.11.2008 by approving the enhanced gratuity of Rs.10 lakhs w.e.f. 01.01.2007. What made them change their minds? If the 6th CPC gratuity is to be implemented from 01.01.2006, then why this step motherly treatment to us? Are’nt we paying the same taxes as them? Hon. PM and FM, please look into this aspect as we have become easy targets and have lost out on Rs.6.5 lakhs which we were eagerly looking forward to.