If a person works continuously for more than 4 and a half years, then he gets a huge amount as gratuity. However, it depends on how long that employee has spent in the job. Let’s know about it in detail.
The salaried person, whether in the government sector or private sector, gets the benefit of gratuity after a certain period of time. Under the labor law, if a person works continuously for more than 4 and a half years, then he gets a huge amount as gratuity. However, it depends on how long that employee has spent in the job.
Actually, gratuity is such an amount given by the company or employer, which is gradually deducted from the employee’s account during the job. It is obvious that the money received as gratuity is also a part of your earnings in a way.
In such a situation, the question arises whether the employee will have to pay tax on this money like other income. When we talked to the experts of tax matters about this, many shocking information came to the fore.
Manoj Jain, an expert in investment and tax matters, says that gratuity is a part of the employee’s salary, which is gradually deducted by the company and after a certain time, when the employee resigns or retires, this amount is given in lump sum. There is a provision of tax exemption on this under income tax rules, but there is a big difference in the tax exemption limit for government and private sector employees.
How much is the tax exemption for government employees
Manoj Jain says that earlier the amount of up to Rs 10 lakh received by the government employees as gratuity was under tax exemption, but in the year 2018, the government issued a notification by changing the law. Under this, the limit of tax exemption available to government employees on gratuity has been doubled. That is, now government employees will not have to pay any tax on gratuity payment up to Rs 20 lakh.
How much discount for private sector
According to Jain, the amount of tax exemption on gratuity for private sector employees is currently limited to Rs 10 lakh and such employees will have to pay tax according to their slab on the amount received as gratuity above Rs 10 lakh. However, discussions are on to provide more tax exemption on gratuity to private sector employees and if a decision is taken in future, they will also get tax exemption on payments up to Rs 20 lakh.
