Section 10(10)(iii)

Section 10(10)(iii) — the law in short

What the courts have decided on section 10(10)(iii), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• G. Srinivasan v Union of India — the twenty-lakh gratuity ceiling applies by date of retirement, and a PSU retiree who left before 29 March 2018 cannot have it High CourtHelps departmentValidity unconfirmed
  My client retired from a public sector undertaking a few weeks before 29 March 2018 and was paid twenty lakhs of gratuity, but tax was deducted on ten lakhs of it. Central Government employees had already been given the twenty-lakh ceiling from 1 January 2016. Can I get the higher exemption on Article 14 grounds?
  No. The Madras High Court dismissed exactly that writ petition. The increased ceiling in section 4(3) of the Payment of Gratuity Act came into force on 29 March 2018 and CBDT notification S.O. 1213(E) applies the twenty-lakh income-tax limit only to employees who retire, become incapacitated or die on or after that date or whose employment is terminated on or after it; the Court held it could not push either instrument back to 1 January 2016, that employees of the Central Government and of public sector undertakings are not a single homogeneous class, and that an exemption provision must be construed strictly with ambiguity resolved in favour of the Revenue.
• Statutory position — s.10(10): the three limbs of the gratuity exemption, the twenty-lakh ceiling set by S.O. 1213(E), and why the ceiling is an aggregate across employers and across years CBDT Circulars & InstructionsCuts both ways
  My client retired last year and received gratuity from two employers in the same year. The Assessing Officer says he can only have one twenty-lakh exemption in total, and has also asked about gratuity he received when he changed jobs in 2014. Is that right, and where does the twenty-lakh figure come from?
  The Assessing Officer is right on both points. Section 10(10) has three separate limbs and only the third carries a Central Government ceiling; that ceiling is twenty lakh rupees, specified by CBDT notification S.O. 1213(E) dated 8 March 2019 in relation to employees who retire, become incapacitated prior to retirement or die on or after 29 March 2018, or whose employment is terminated on or after that date. The first proviso to the clause caps the aggregate exemption where gratuities are received from more than one employer in the same previous year, and the second proviso reduces the ceiling by whatever was left out of total income under the clause in any earlier previous year — so the twenty lakhs is a once-in-a-lifetime cumulative allowance, not a per-employer or per-year one.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.