Answer to Question #248517 in Accounting for Abhijeet

Question

16. (P4.29*) X, an employee of LMN Ltd., receives Rs. 93,000 as gratuity under the Payment of Gratuity Act, 1972. He retires on January 2, 2021 after rendering service of 20 years and 6 months. At the time of retirement monthly salary was Rs. 8,000 (inclusive of dearness allowance of Rs. 200 per month). Calculate amount of gratuity chargeable to tax. [Ans: Rs. 692]

Answer 1

$Gratuity = Last drawn salary x 15/26 x No. of years of service$:

The amount in excess of the tip received is subject to taxation

$93000-\frac{20\times8000\times15}{26}=692$