No income tax for gratuity up to Rs 20 lakh, announces Finance Minister Arun Jaitley

Ahead of Lok Sabha elections, the government has given announced another bonanza to lure the middle class and enhanced the Income Tax Exemption for Gratuity to Rs 20 lakh. Union Finance Minister Arun Jaitley made the announcement on his official Twitter handle. Jaitley said that this will benefit all the employees of the Public Sector Unit (PSU) who other employees who are not covered by the Payment of Gratuity Act.

"Income Tax Exemption for Gratuity under Section 10(10)(iii) of the Income Tax Act has been enhanced to Rs. 20 lakh. Would benefit all PSU employees and other employees not covered by the Payment of Gratuity Act," the finance minister tweeted.

Earlier in its last budget, the Narendra Modi government had announced full tax rebate for those earning up to Rs 5 lakh. "Individual taxpayers having annual income up to Rs 5 lakhs will get a full tax rebate. Individuals with gross income up to 6.5 lakh rupees will not need to pay any tax if they make investments in provident funds and prescribed equities,” the acting finance minister Piyush Goyal had announced in his interim budget speech.

The government had also decided to hike the gratuity limit from Rs 10 lakh to Rs 30 lakh and also announced a Mega Pension Yojana under which Rs 3,000 per month will given to unorganised sector employees.