Gratuity of up to Rs 10 Lakhs is free from income tax. How do we show it in the income tax returns?
-P S SivaSubramanian
Gratuity received by the Central and State Government employees, Defence employees and employees in local authorities such as municipal corporations is fully exempt from tax. For others, some portion of gratuity received is exempt from tax as per Section 10(10) of the Income Tax Act, depending on whether you are covered under the Payment of Gratuity Act or not. Gratuity is taxed under the head Income from Salaries. The exemption varies and depends on whether you are covered under the Payment of Gratuity Act or not. The maximum limit is Rs 10 lakhs. On the ITR-1 form, enter the gratuity amount as income after deducting the exempted amount, the same exempted amount to be entered in 'Exempt Income' section for verification.