Applicability of exemption limit of Rs 20 Lakh of Gratuity for employees retiring before 29.03.2018.
Facts of the case are as given below.
- I retired from, a PSU from 31.01.2018. I was paid as um of Rs. 10 lakhs as retirement gratuity, which was exempt from tax as per the prevailing tax laws.
- After my retirement, in August 2018our company revised the pay scales of executives retrospectively w.e.f. 01.01.2017. In the revised pay scales, the ceiling of gratuity payable on retirement was enhanced from Rs. 10 lakhs to Rs.20 lakhs.
- Central govt. enhanced the tax free limit of gratuity from Rs. 10 lakhs to Rs. 20 lakhs w.e.f 29 th March 2018.
- As I was on roll on 1.01.2017, our PSU has sanctioned additional gratuity of Rs. 10 lakhs as per revised pay-scale to me in October 2018. While paying the gratuity , it has deducted TDS @ 31.2%. Company has also included the gratuity amount as my taxable income in the annual return submitted to Income Tax Dept. As well as form no. 16 issued to me.
In view of above facts, I would request you to give your valued opinion on following points.
- Whether this additional is taxable on accrual basis (treating my retirement date as accrual date) or it should be treated as exempt on receipt basis as the date of receipt is after the Income tax notification date i. 29.03.2018.If the gratuity is taxable on receipt basis, the Company has made error by treating it as taxable and making TDS @ 31.2%.
- I personally feel that the amount of additional gratuity accrued only in August 2018 (on pay revision) and was paid in October 2018 . Since both above dates are after the Income Tax gazette notification date i.e 29.04.2018, the additional gratuity should have been exempt in my hand.
- If my contention is correct, then the TDS amount should be refunded to me. Can I claim refund in my tax return for the A.Y. 2019-20.?. In that case there will be mis-match of Income as per the annual return submitted by the company to the tax deptt. As well as form 16 issued to me. In that case can it be treated as concealment of income which is actionable?
Sir. I request to kindly go through above facts and offer your expert opinion.