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Non-Government Employees receiving Gratuity (Not covered under Payment of Gratuity Act)

 

Least of the following 3 amounts shall be exempt :

  1. 1/2 month salary for every completed year of service on the basis of average salary drawn during 10 months immediately preceding the month of retirement.

  2. Maximum notified limit, ` 10,00,000.

  3. Gratuity actually received by the employee and balance shall be taxable

Taxable gratuity = Actual gratuity received - Exempt

Important Notes :

  1. Employees not covered under POGA, 1972.: Employees working in any shop or establish-ment in which less than 10 persons are employed or were employed on any day of the preceding 12 months.

  2. Calculation of length of service/service period. : While calculating length of service, only completed years are to be counted. Thus, any fraction or part of the year is to be ignored. For example (i) If service period = 25 year 9 months, it is to be taken as 25 years. (ii) If service period 25 years 4 months, it is also to be taken as 25 years.

  3. How to calculate ½ (Half) month’s salary ? : ½ month’s salary is to be calculated on the basis of average salary drawn during the 10 months immediately preceeding the month of retirement. For example, if an employee retires on November 15, 2013, average salary is to be calculated by taking total salary drawn during past 10 months (i.e., from January 1, 2013 to October 31, 2013).
    Now :              ½ month’s salary = Average salary x ½

  4. Meaning of Salary. The word ‘salary’ here has the same meaning as is assigned to it for provident fund purposes.

Thus, Salary = Basic Salary + D.A. (Enters) + Commission payable at a fixed percentage of turnover achieved by employee

D.A. shall be part of basic salary if it enters into salary for calculating all retirement benefits. In case a part of D.A. enters only to calculate some of the retirement benefits then that part of D.A. will not be taken as part of basic salary for this purpose.

5. Whole life limit. Same as discussed in case of employees covered under Payment of Gratuity Act, 1972.

6. Relief U/S 89(1). Same as discussed in case of employees covered under Payment of Gratuity Act, 1972.

 
More.. Topics ... @ ' SALARY'
Salary-Definition & Meaning

Computation of Salary Income

Definition of Word ‘Salary’ [ Section 17(1)]

Section-15 : List of Incomes Chargeable to Income Tax under the head ‘ SALARIES’

Important Points / Characteristics for Computing Salary Income

Provident Fund

Treatment of Provident Funds (PF) for Computing Salary Income

Taxable Portion of annual accretion to RPF [Section 17(1)(vii)]. for Computing Salary Income

Transferred Balance from URPF to RPF [Section 17(1)(vii] for Computing Salary Income

Refund from Provident Fund [Section 17(3)(ii)] for Computing Salary Income

New Pension Scheme [ NPS] for Central Government and other Employees joining new jobs on or after 1-1-2004 for Computing Salary Income

 
Allowance [ Section 17(3)]

Allowance [ Section 17(3)] – for Computing ‘Salary’ Income

Fully Exempted Allowances for Computing ‘Salary’ Income

Fully Taxable Allowances for Computing ‘Salary’ Income

House Rent Allowance (HRA) for Computing ‘Salary’ Income

Allowances covered u/s 10 (14) for Computing ‘Salary’ Income

Meaning Of Salary For Different Purposes
PERQUISITES [Section 17(2)]

Meaning and Types of Perquisites [ Section 17(2)]

Taxability of Perquisites for Computing Salary Income

Perks Exempted From Tax for all Employees and not added in Salary Income

Rent Free House [Section 17(2)(i) Rule 3(1)]

Rules Regarding Calculation Of Value Of Rent Free House

Valuation Of Rent Free Accomodation (Unfurnished & Furnished)

Valuation of Rent Free Accommodation Provided as Concessional Rent [Sec. 17(2)ii)]

Obligation of Employee of Rent Free House met by Employer [Section 17(2)(iv)]

Sum payable by the Employer directly or through a fund to effect an assurance / an annuity [Section 17(2)(v)]

Any specified security or sweat equity shares allotted or transferred to employee [Section 17(2)(vi)] [ w.e.f. 1-4-2009]

Contribution to an Approved Superannuation Fund by the Employer [Sec. 17(2)(vii)]

Interest free or Concessional loan from employer [Rule 3(7)(i)]

Valuation of Perk in respect of Travelling, Touring, Accommodation

Food or Beverages Facility by Employer to Employee

Valuation of Perquisite in respect of Gift Voucher or Token

Valuation of Perquisite in respect of Credit Card

Valuation of Perquisite in respect of Club Facility

Use of Moveable Assets by Employer to Employee

Transfer Of Moveable Assets to the employee

Meaning of Specified Employee for Taxable Perquisites [Section 17(2)(iii) Rule 3]

Valuation of Perquisite of Motor Car or any Other Automotive Conveyance [Rule 3(2)]

Perquisite of Free domestic servants [Rule 3(3)]

Perquisite in respect of free supply of gas, electric energy, water supply [Rule 3(4)]

Free Educational Facilities to Children of Employee’s Household [Rule 3(5)]

Facility of Free or Concessional Private Journey to an employee by the employer engaged in the carriage of passengers or goods [Rule 3(6)]
PROFITS IN LIEU OF SALARY [17(3)]

Receipts treated as Profit in Lieu of Salary [ Section 17(3)]

Leave Travel Concessional (LTC) Assistance [Section 10(5)]

Death-Cum-Retirement Gratuity [Section 10(10)]

Non-Government employees receiving gratuity under payment of Gratuity Act, 1972 [POGA]

Non-Government Employees receiving gratuity (Not covered under payment of Gratuity Act)

PENSION [Monthly and Commuted] for Computing Salary Income

Leave Encashment [Section 10(10AA)] for Computing Salary Income

Any amount received as compensation on termination of employment [Section-10B]

Any amount received on voluntary retirement [Section 10(10C)]

Payment received from Recognised Provident Fund [Section 10(12)]

Any payment from Superannuation Fund [Section 10(13)]

 
DEDUCTIONS OUT OF GROSS SALARY [ Section-16]

Entertainment Allowance to Government Employees [Section-16(ii)]

Tax on Employment Under Section - 16(iii)

 
DEDUCTIONS U/S 80C OUT OF GROSS TOTAL INCOME

Section - 80C : Deductions from Gross Total Income (GTI) in case of Individual and HUF

Qualifying Amount ( Q.A.) for Deduction U/s 80C

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