Relief u/s 89(1) on gratuity received in Financial year 2010-11

Gratuity is taxable in employees hands subject to some Exemption and rebates. Tax on Gratuity payment is depended on status of the Employee.To study impact of tax due to Gratuity payments , employee are divided in three categories and taxed accordingly .Most of persons are aware of maximum exemption limit for Category two and three below,i.e Rs 350000/- for employees retired on or before 24.05.2010 and Rs10,00,000 for person retired there after .

But a Few people know that relief u/s 89(1) is also available on Balance amount of taxable gratuity .We have prepared a calculator to calculate Tax relief u/s 89(1) on taxable part of gratuity.

This calculator is helpful for person who are covered in category three(given below) and retired on or before 24.05.2010 and received gratuity amount in financial year 2010-11.So if you have already filed your return for Financial year 2010-11 then you have revise the income tax return.

Calculator is given under.Fill only yellow cells.Click on "click on edit" to edit data. Enter data one by one slowly.Sheet may take time to update.Calculator will be available for download in January ,2012 .Report errors in comments or mail me guptarajin at
If calculator not opened below the click this link
Relief u/s 89(1) is a arithmetic exercise .
  1. First calculate tax rate( %)after inclusion of taxable gratuity in year of receipt .
  2. Second calculate tax on last three year income after adding 1/3 of taxable gratuity each year.
  3. Calculate average rate of tax for last three year.
  4. Calculate tax on taxable gratuity amount @ rate calculated in (1) above.
  5. Calculate tax on taxable gratuity amount @ rate calculated in (3) above.
  6. Calculate tax relief u/s 89(1) by reducing value as per (4) minus value as per(5) above.

As per Income Tax act ,Section 10(10),employees has been divided in three categorise.

  1. Employee of Central/State Government and Local bodies :Gratuity received by these employees is fully exempted without any limit.
  2. Employee covered under Payment of Gratuity Act: Amount received as per Gratuity Act is fully exempted .Means Income Tax has not defined /set any Limit for such employees.Means as soon as the amount of Gratuity Act ,enhanced ,Income tax Limit will also enhanced.As the income Tax act only refer the Payment of gratuity act .
  3. Other employee:For other remaining employee Limit is defined under the Income Tax act ,which is at present 3,50000.But many PSU ,which is not covered under the Sate or Central Govt definition as per sr number 1 and 2 above ,has started to pay ,gratuity as per Sixth pay commission ,maximum up to 10 lakh .So amount in excess of 3.5 lakh is taxable in hand of such employees .As the Limit is enhanced in Payment of Gratuity Act as per sr number 2 even then separate notification under this sub clause [10(10)(iii)} is required .The Limit is related to date of retirement /resignation and not to date of receipt.Update :Govt has enhanced the exemption limit for person retired after 24.05.2010 .

2426Q DUE DATE 44AB 44AE 44AF 49A 49AA 54 54B 54EC 54f 80C 80CCC 80CCD 80CCE 80CCF 80E 89(1) aces agricultural land amt on llp bank BANKS bounced cheque BUDGET BUDGETING buyers agreement CA AUDIT LIMIT capital gain carry forward losses challan booked status challan correction changes in challan changes in pan application form changes in pan data CIC CII citizen charter delhi companies tax rates company pan coparcener CORRECTION IN BANK CHALLAN correction in challan correction in etds return COST INFLATION INDEX CREDIT CARD DEDUCTION DEFAULT NOTICES dividend distribution tax (DDT) documents with pan DUE DATE FOR SERVICE TAX RETURN e paymnet of excise duty e-payment of service tax e-return by Legal Heir efiling of return elss etd return rejection ETDS etds return due date etds statement correction exchange traded funds excise return fcnr FESTIVAL SEASON firm tax rates FORM 16A form 24Q DUE DATE FORM 27Q DUE DATE free software er-1 free software st-3 FVU get pan with name and dob gift gold gold etf gratuity taxabilty house HOUSE LOAN house property house purchase agreement purchase house rent calculator house sale how to calculate tds on salary hra hra calculation huf pan huf (hindu undivided family) icai toolbar identity proof income tax challan income tax help toolbar income tax rates income tax rates firms income tax rates llp income tax refund income tax return income tax slabs individual pan INFRASTRUCTURE BONDS inter head adjustment inter source adjustment INTEREST INTEREST ACCRUED ON NSC interest on late closer kvp nsc time deposit post office interest on late deposit interest rate on tds late deposit investment plans itr-v itr-v status joint account kissan vikas patra know your pan kvp late deposit of tds leave travel concession lic life insurance limited liability partnership llp loan against rent long term capital gain ltcg mandatory e filing mat(minimum alternate tax ) minor pan mutual fund statement mutual funds negotiable instrument act new pan application form nri nro nsc NSC INTEREST pan application pan data pan form pan name pan verification pan with name physical gold pio POST OFFICE RB ACCOUNT post office time deposit ppf ppf limit 100000 ppf Limit 70000 or 100000 PREPAYMENT CHARGES proof of residence public provident fund RBI registration at aces relief on gratuity repo rate return verification reverse repo rate REVISED ETDS RETURN revised return RIGHT TO INFORMATION RTI saving bank rate SBI scrutiny cases scrutiny guidlines ay 2010-11 SERVICE TAX SERVICE TAX RETURN DUE DATE NOTIFICATION SERVICE TAX RETURN set off losses SHOPPING short term capital gain stcg SUB CONTRACTOR TAN REGISTRATION tax on gratuity tax on salary income tax rate on llp. tax savings TCS RATES TDS 194 A tds certificate TDS IN COURT CASE TDS ON AGRICULTURE LAND TDS ON COMPENSATION tds on salay TDS RATES TDS RATES 10-11 TDS RATES 11-12 who can sign return WORKS CONTRACTOR
Income Tax India: Relief u/s 89(1) on gratuity received in Financial year 2010-11
Relief u/s 89(1) on gratuity received in Financial year 2010-11
Income Tax India
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