our expert offers tips on various taxrelated issues in this weekly column recent enhancement in limits of gratuity payment has generally been cheered by employees although some worry that these limits for nongovernment employees are applicable prospectively and not retrospectively a lot of queries have been received as to the taxability or otherwise of the gratuity received by different category of employees in this context it is important to note that all gratuity received by an employee is not exempt from tax per se except up to limits specified under the provisions of the incometax act 1961 therefore it is important to take a note of the relevant tax provisions in this regardgovernment employeesthe government had earlier enhanced the limits up to which gratuity could be received by the employees covered under the government pensiongratuity scheme in line with the recommendations of the sixth pay commission as per the provisions of the it act 1961 any deathcumretirement gratuity received under the pension rulesscheme of the central government or state government or regulations applicable to the members of defence services is not taxablegratuity received under the gratuity actin respect of employees receiving gratuity under the payment of the gratuity act 1972 any gratuity received to the extent that it does not exceed an amount calculated in accordance with the provisions of the gratuity act is not taxable recently the government had enhanced the limit for payment of gratuity under the gratuity act from rs 35 lakh to rs 10 lakh the exemption limits in this case would apply accordinglyother employeesin respect of employees receiving gratuity other than under the government pensiongratuity scheme and also other than under the payment of the gratuity act the computation mechanism in respect of exemption limits has been specified under the it act it is pertinent to note that recently the central board of direct taxes cbdt has issued a notification enhancing the overall tax exemption limit to rs 10 lakh though this is a welcome step in case of other employees the following points merit attention while claiming exemptionthe gratuity received by an employee is not taxable if it is received on his retirement his becoming incapacitated prior to such retirement termination of employment or if such gratuity is received by his widow children or dependants on his death further such gratuity does not exceed onehalf months salary for each year of completed service calculated on the basis of the average salary for 10 months immediately preceding the month in which such retirementdeath etc takes place subject to the limits prescribed by the central government salary for this purpose includes dearness allowance if the terms of employment so provide but excludes all other allowances and perquisites also as per some judicial precedents completed service would mean a total period of service whether under one employer or morein case any such gratuities are received by an employee from more than one employer in the same financial year the aggregate amount so exempt shall not exceed the