CA Intermediate · Taxation · Salaries
Mr. Ramesh Iyer, a clerk with the Government of Tamil Nadu, retired on 31 October 2026 and received a death-cum-retirement gratuity of Rs 14,00,000 from the State Government. He has no other gratuity. What is the taxable amount of this gratuity in his salary income for tax year 2026-27?
The taxable gratuity is nil. Gratuity received by a Central or State Government employee on retirement is fully exempt from tax without any upper limit. The monetary cap and the 15/26 formula apply only to employees of private employers, so Mr. Iyer's Rs 14,00,000 is completely exempt.
- ARs 14,00,000
- BRs 4,00,000
- CRs 6,00,000
- DNilCorrect
Explanation
Gratuity received by a Central or State Government employee on retirement is wholly exempt, with no monetary ceiling. The Rs 20,00,000 limit and the 15/26 formula apply only to private-sector employees. Applying the Rs 10,00,000 old ceiling or the Rs 20,00,000 limit to a government employee would be wrong.
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