NPS Retirement Gratuity-Govt.- Allows Grauty For NPS eMPLOYEES aLSO
Gratuity is a benefit entered by an hand for services rendered to an organisation. For companies covered under the Gratuity Act, this benefit is paid when an hand completes five or further times of service with the employer. An hand gets gratuity when he she resigns, retires or is laid offIn case of death or disablement there's no minimal eligibilityperiod.How Gratuity is Calculated.
The gratuity quantum depends upon the term of service and last drawn payment. It's calculated according to this formula Last drawn payment( introductory payment plus honey allowance) X number of completed times of service X15/26.
This means if you have completed five times and seven months of service, the number of times would be considered as six times for computation of gratuity benefit.
On the other hand, if the service period is five times and five months, for gratuity computation it'll be considered five times.
An employer can still give advanced gratuity than the quantum under the specified formula.
Maximum quantum
For government workers,Rs. 20 lakh is the maximum quantum that can be paid as gratuity. The Seventh Pay Commission had recommended increase in the gratuity ceiling toRs. 20 lakh from the earlier position ofRs. 10 lakh.
Income Tax Treatment of Gratuity
For government workers, entire quantum of gratuity entered on withdrawal or death is presently exempted from income duty.
In case ofnon-government workers, income duty rules on gratuity are applicable depending on whether workers are covered under the Payment of Gratuity Act, 1972 or not.
Fornon-government workers covered under the Gratuity Act, the income duty impunity on any gratuity entered is least of the following
Maximum Quantum specified by the government which is presentlyRs. 10 lakh
Last drawn payment X15/26 X times of service
factual gratuity entered
For illustration, the last drawn payment( introductory plus DA) of Mr Ashish, for illustration, isRs.,000( per month) and he has worked for 25 times. The gratuity according to the formula isRs.8.65 lakh but suppose he has actually entered gratuity ofRs. 12 lakh.
So for income duty computation,Rs.8.65 lakh will be considered for impunity. So Mr Ashish will pay duty onRs.3.35 lakh(Rs. 12 lakh-8.65 lakh).
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