I retired from a financial institution on September 30, 2018. However, my enterprise deducted tax and suggested tax exemption on gratuity as much as Rs 10 lakh and deducted full tax on the amount exceeding Rs 10 lakh. The financial institution quoted: “As according to circular No.138 dated 17.06.1974 modification to Income Tax Act, rationalization and simplification at the assessment of Salaried Taxpayers Finance Act 1974 Section 10(10) (ii) that is the exemption of up to Rs 20 lakh could observe handiest where the price is made following the provisions of Section 4(2) of the payment of gratuity (poga).
Where improved payments are furnished to the employees via distinctive features of Section 4(five) of the Poga, the same would be blanketed usa10(10)(iii) of the Income Tax Act, and the exemption is confined to Rs 10 lakh. This view is based on the premise that better terms of gratuity are regarded as gratuity payment under the agreement or agreement with the company and not under the charge of Gratuity Act.”
However, in light of the cutting-edge government announcement (following the March 29 circular), it was clarified that the limit has been multiplied and will probably come into effect on the grounds of March 31, 2018. Please, therefore, propose to me whether the aforesaid modifications in gratuity restriction exemption are relevant to me, as I had retired effective October 1, 2018. Can I get my money back from taxes? Can I-T authorities additionally pay me interest? — Mohan Kokane
Section 10(10)(ii) of the I-T Act 1961 applies, under which the payment of gratuity is made according to the availability of Section four(2) and four(three) of the Payment of Gratuity Act 1972 (Poga). In every other gratuity payment, the equal will be included usa10(10)(iii) of the I-T Act 1961. From the recommendation furnished through your business enterprise, it is understood that you have received a better amount of gratuity as per the separate settlement or contract with the employer and are no longer in keeping with the Gratuity Act.
Hence, you will be capable of claiming exemption united section america10(10)(iii) of the I-T Act 1961. On 8 March 2019, vide notification No.16n, the Ministry of Finance has enhanced the profits tax exemption for gratuity received under Section 10(10)(iii) of the I-T Act 1961 to Rs 20 lakh for personnel who retire on or after 29 March 2018. You have retired on 30 September 2018.
Therefore, you will be eligible to say a more suitable restriction of Rs 20 lakh as an exemption. As your business enterprise has already deducted tax considering a limit of Rs 10 lakh, whilst filing your income tax return for AY 2019-20, you could claim an exemption for gratuity received to the extent of Rs 20 lakh, United States of America 10 (10)(iii), and claim the tax deducted by your company.
