The government has raised the income tax exemption limit for gratuity payments from the existing Rs3.5 lakh to Rs10 lakh effective 24 May 2010.
The Central Board of Direct Taxes (CBDT) has approved a notification setting Rs10 lakh as the maximum amount of gratuity entitled to exemption under sub-clause (iii) of clause (10) of section 10 of the Income Tax Act 1961.
The notification will be applicable to employees who retire, or become incapacitated before retirement, or expire, or whose services are terminated, on or after 24 May 2010, a finance ministry release said today.
The finance ministry yesterday notified a rule in this regard after the Parliament approved raising the limit of gratuity to be exempted from income tax.
The Payment of Gratuity (Amendment) Bill, 2010, was passed by the Parliament in this regard in the Budget session.