Income tax on arrears of Gratuity paid after the date the Exemption limit Of Gratuity raised to Rs.10/-Lacs

POSTED BY RajaniKant ON March 22, 2011 9:39 am ONE COMMENT

Respected sir,                                                                           22/03/2011
I am a retired Bank official retired on 30/09/2009.At the time of my retirement the exemption limit for Gratuity was Rs.3.5/lacs.However due to wage revision i got arrears of Gratuity Rs.151000/-In the month of Aug 2010 by which time Gratuity Exemption limit was raised to Rs.10,00 000/- Whether gratuity arrears of Rs.151000/- received by me in Aug,2010 is taxable?
Second query I paid Rs.630000/- by way contribution towards Pension fund to avail Pension option which was compulsory if u want to exercise  second option of pension.This is applicable to all employees who now opted for pension has to contribute 56% of the banks contribution they received which also has to be refunded.
Question is whether we can claim exmption for the amount we received by way of pension? In my case I received Pension of Rs.301110/- up to March 2011 and I paid Rs.630000/- towards pension cost.
Since the year ending is very close i request u to assist me in the matter at your earliest.
This will be useful to all employees in the Banking Industy who opted for second option of pension
with regards

One reply on this article “Income tax on arrears of Gratuity paid after the date the Exemption limit Of Gratuity raised to Rs.10/-Lacs”

  1. ashal jauhari says:

    Dear Rajnikant, receiving arrears of Gratuity is similar to receiving salary arrears. So the gratuity received in 2010 ‘ll remain tax free. The reason is – Income is chargeable to tax in the year of receipts. In case o0f arrears, if the income exceeds than normal slab rate due to arrears, one has the option to use section 89 relief to distribute the arrears’ income for previous years.
    In your case, Gratuity is received in 2010 after the notification of enhanced limit, so you may use the 10L Rs. limit for claiming zero tax on gratuity arrear.
    Regarding your pension related query, it’s not clear, which money was paid back to bank to purchase pension? In case the purchase amount was adjusted from taxable income, you may claim the same for your reduced taxable income. In case you had purchased from your EPF amount, as the EPF amount is tax free, the same ‘ll not be available for tax deduction.
    Please clarify for pension purchase amount.

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