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I took gratuity amount of ₹20 lakh in financial year 2018-2019, which was exempted from income tax as per the Income Tax Act, 1961. In the next financial year, ie, 2019-2020, I again received some additional gratuity amount . Will this be exempt from income tax ? Kindly clarify.
Vinod Sharma
As per the provisions of Section 10(10) of the Income Tax Act, gratuity received by an employee can be considered as exempt, subject to the specified conditions and a maximum limit of ₹20 lakh (as currently specified by the Central government). If such gratuity is received over a period of more than one year, the aggregate exemption claimed for such gratuity should not exceed the specified limit — ₹20 lakh.
I understand that you have already claimed exemption of ₹20 lakhon gratuity received for FY2018-19.
As the specified limit of ₹20 lakhis exhausted in your case, no further exemption can be claimed by you on account of additional gratuity received.
I have been working for Dhanlaxmi Bank for 24 years in Thrissur and have been reading BusinessLine every day for the past 20 years. Please advise me on the following: While calculating tax, can any amount be deducted from total income on the encashed LTC (not on leave surrender) amount if I submit any supporting documents on the expenses incurred? After encashment, the applicable slab rate is 30 per cent. Hence, I seek your your advice .
Tony AF
I understand that your query is on receipt of leave travel concession (LTC) allowance from your employer as part of your salary income. Section 10(5) of the I-T Act provides for the exemption of LTC.
As per the aforesaid provisions, exemption of expenses incurred on travel (for definition of family — refer below) within India can be claimed from LTC received from employer.
Such claim is subject to fulfilment of conditions as specified in Rule 2B of the I-T Rules, such as two travel allowed in a block of years (current block is from 2018 to 2021), etc.
The claim is required to be supported by proofs and documents in respect of actual expenses incurred.
As a practice, organisations obtain proofs of such expenses incurred and allow the exemption while deducting taxes (TDS) on payment of salary of the employee and the same is also reflected in the Form 16 issued by the employer.
Please note that for the purpose of LTC exemption, family means spouse and children (maximum of two children, if born after 1 October 1998, or more than two, if multiple births on second occasion) of the individual, and parents/siblings of the individual, wholly or mainly dependent on him/her.
The writer is a practising chartered accountant. Send your quries to taxtalk@thehindu.co.in
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