Dear Learned Experts,
Greetings!
With this post I am trying to bring a peculiar situation.
I was working with an educational institute under the ministry of education, GoI. I resigned technically from the institute to take up new position after rendering service of 7+ years at another educational institute under the same ministry. We are governed by the Payment of Gratuity Act, 1972. I have also rendered more than 5+ years' service at this institute. Thus, a total of 13+ years service have been rendered. Now, the previous institute has transferred a sum of Rs 2.85 lakhs to my institute on account of the services rendered at their institute. The current organization is okay to make the payment of the receipt amount to me, however, they are asking to tax it (citing in-service gratuity), whereas there's no contribution of the present institute on the received amount. Additionally, the duration of the services for which gratuity is being paid, shall also be deducted from my entire length of service, so as to not exceed the defined limit of Rs 20.00 lakhs.
Could you please guide, whether there should be any tax on it? What if I take it from the institute or what if I leave it to the institute for counting of my service.
Hope my concern reaches the experts.
Best
The gratuity paid to an employee is viewed as a portion of salary and is therefore taxable under income tax act.
However, any gratuity received by an employee of central government, state government or local authority is wholly exempt from tax.
This exemption is not available to employees of statutory corporations.
However tax on gratuity is limited since the government offers exemptions on the tax on gratuity under certain conditions.
