Income Tax Act, 2025
Section 3: Subs. by Act 4 of 1988, s. 6, for the certain words (w.e.f. 11989).
3. Subs. by Act 4 of 1988, s. 6, for the certain words (w.e.f. 11989).
4. Subs. by s. 6, for clause (10), ibid, “shall not exceed thirty six thousand rupees” (w.e.f. 11989).
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Provided further that where any such gratuity or gratuities was or were received in any one or
more earlier previous years also and the whole or any part of the amount of such gratuity or gratuities
was not included in the total income of the assessee of such previous year or years, the amount
exempt from income-tax under this clause 1[shall not exceed the limit so specified] as reduced by the
amount or, as the case may be, the aggregate amount not included in the total income of any such
previous year or years.
2* * * * *
Explanation.—3[In this clause, and in clause (10AA)], “salary” shall have the meaning assigned to
it in clause (h) of rule 2 of Part A of the Fourth Schedule;]
4[(10A) (i) any payment in commutation of pension received under the Civil Pensions
(Commutation) Rules of the Central Government 5[or under any similar scheme applicable to the
members of the civil services of the Union or holders of posts connected with defence or of civil posts
under the Union (such members or holders being persons not governed by the said Rules) or to the
members of the all-India services or to the members of the defence services or to the members of the
civil services of a State or holders of civil posts under a State or to the employees of a local authority]
or a corporation established by a Central, State or Provincial Act;
(ii) any payment in commutation of pension received under any scheme of any other employer, to
the extent it does not exceed—
(a) in a case where the employee receives any gratuity, the commuted value of one-third of
the pension which he is normally entitled to receive, and
(b) in any other case, the commuted value of one-half of such pension,
such commuted value being determined having regard to the age of the recipient, the state of his
health, the rate of interest and officially recognised tables of mortality;
6* * * * *
7[(iii) any payment in commutation of pension received from a fund under clause (23AAB);]
8[(10AA) (i) any payment received by an employee of the Central Government or a State
Government as the cash equivalent of the leave salary in respect of the period of earned leave at his
credit at the time of his retirement 9[whether on superannuation] or otherwise;
(ii) any payment of the nature referred to in sub-clause (i) received by an employee, other than an
employee of the Central Government or a State Government, in respect of so much of the period of earned
leave at his credit at the time of his retirement 9[whether on superannuation] or otherwise as does not
exceed 10[ten months], calculated on the basis of the average salary drawn by the employee during
1. Subs. by Act 4 of 1988, s.6 for “shall not exceed thirty six thousand rupees” (w.e.f. 11989).
of rule 2 of Part A of the Fourth Schedule;]
4[
(i) any payment in commutation of pension received under the Civil Pensions
Rules of the Central Government 5[or under any similar scheme applicable to the
members of the civil services of the Union or holders of posts connected with defence or of civil posts
under the Union (such members or holders being persons not governed by the said Rules) or to the
members of the all-India services or to the members of the defence services or to the members of the
civil services of a State or holders of civil posts under a State or to the employees of a local authority]
or a corporation established by a Central, State or Provincial Act;
any payment in commutation of pension received under any scheme of any other employer, to
the extent it does not exceed—
in a case where the employee receives any gratuity, the commuted value of one-third of
the pension which he is normally entitled to receive, and
in any other case, the commuted value of one-half of such pension,
such commuted value being determined having regard to the age of the recipient, the state of his
health, the rate of interest and officially recognised tables of mortality;
6* * * * *
7[
any payment in commutation of pension received from a fund under clause
(i) any payment received by an employee of the Central Government or a State
Government as the cash equivalent of the leave salary in respect of the period of earned leave at his
credit at the time of his retirement 9[whether on superannuation] or otherwise;
any payment of the nature referred to in sub-clause
received by an employee, other than an
employee of the Central Government or a State Government, in respect of so much of the period of earned
leave at his credit at the time of his retirement 9[whether on superannuation] or otherwise as does not
exceed 10[ten months], calculated on the basis of the average salary drawn by the employee during
1. Subs. by Act 4 of 1988, s.6 for “shall not exceed thirty six thousand rupees” (w.e.f. 11989).