Gratuity Taxable or Not: The gratuity limit for central employees has increased to Rs 25 lakh. Everyone wants to know whether the gratuity increased by the government will be taxed or not. In this article, know how this limit will work for government employees, and what are the rules for private employees.
Gratuity Taxable or Not: The Government of India has increased the gratuity limit for central government employees to Rs 25 lakh. This limit has come into effect from January 1, 2024. Earlier this limit was Rs 20 lakh. After this increase, now the amount of gratuity received by government employees due to retirement or death has increased. The government has taken this decision under the recommendations of the ‘Seventh Pay Commission’.
On May 30, 2024, the Department of Pension and Pensioners Welfare, Ministry of Personnel, Public Grievances and Pensions issued a circular. In this, the new gratuity limit was announced.
Tax on gratuity?
Talking about tax on gratuity for government employees, the gratuity received due to retirement or death for central government employees is completely income tax free. This means that gratuity up to Rs 25 lakh received by government employees will be completely tax free.
Gratuity rules for private employees
The rules for gratuity are different for private employees. Whether private employees come under the ‘Payment of Gratuity Act, 1972’ or not, they still get gratuity up to Rs 20 lakh tax free. Tax is applicable on the amount above this limit. There is no rule like central government employees in this case.
Will the gratuity limit of private employees increase?
At present, the maximum gratuity limit for private employees is up to Rs 20 lakh. It has not been increased yet. If the government wants to increase the gratuity limit for private employees, then a separate notification will have to be issued for this. At present, the tax exemption limit for gratuity for private employees is only up to Rs 20 lakh.
Overall, central government employees are getting gratuity up to Rs 25 lakh completely tax free, while for private employees this limit is up to Rs 20 lakh. If this benefit is to be given to private employees as well, then a separate government order will be required for this.
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