Gratuity received by an employee is dealt with under which head of income?
AIncome from other sources
BSalaries
CProfits and gains of business
DIncome from house property
Answer & Solution
Correct answer: B. Salaries
1. Retirement benefits arise out of the employment relationship.
2. Gratuity is therefore dealt with within the head Salaries.
3. It appears in the salary computation alongside leave encashment and pension.
4. Its taxability depends on further conditions, but the head itself is not in doubt.
_Source: ICAI Income Tax Law, Ch3 'Heads of Income', Unit 1 'Salaries', section 1.3_
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