Retirement Benefits for Government Employees

Ali On Content / 18 Jan 2010

Death-cum-retirement gratuity received by government employees is exempt from income tax.

I retired from Indian Army in Aug 2006, hence am eligible for retirement benefits as per the Sixth Central Pay Commission (SCPC). I was paid Rs 3.5 lakh as death-cum-retirement gratuity (DCRG) in 2006 prior to implementation of SCPC which was exempt from Income Tax. Accordingly, the limit of DCRG was raised to Rs 10 lakh on the acceptance of recommendations of SCPC. The balance Rs 6.5 lakh has been released in July 2009, which has been credited in my savings account. As per IT Act 1961 the relevant section [Gratuity (Sec. 10(10)] states: Any death cum retirement gratuity received by Central and state govt. employees, defence employees and employees in local authority shall be exempt. Please clarify if Rs 6.5 lakh released as balance of DCRG is to be counted as income for FY 2009-10 (AY 2010-11) or is it exempt?

- Retired Defence Officer
You are correct to refer to the provisions of Section 10(10)(i) of the Income Tax Act, 1961 which inter-alia exempts death-cum-gratuity paid under the Pension Code or Regulations applicable to the members of the defence services. There is no upper limit specified in the said case. Thus the entire gratuity received under the above will be wholly exempt and not taxable. The income from salaries is taxable in the year of receipt or accrual, whichever is earlier. However as the amount of gratuity received by you is exempt in entirety, even the balance amount of Rs. 6.5 lakh would not be taxable.
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I am a Central govt employee. Recently, the IT Dept sent a letter to me asking me to pay Rs 1007 towards the arrears of outstanding tax for FY2006-07. I went to the bank to pay tax, but they are asking me to pay the money through a form, but nobody is informing me about the form number. Kindly tell me which form I have to submit to the bank while paying tax.
- Santosh Singh
You are required to pay your taxes through a challan in Form No. ITNS 280. The said form can be downloaded from the website: www.incometaxindia.gov.in. As the payment is for arrears as per the letter of the IT Deptt., the tax for Regular Assessment [Code 400] and may be marked accordingly on the challan.

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