f12 Example: An assessee left a job in the year 1995-96 and claimed a deduction of 40,000 for gratuity in that year. He joined another organisation, left the same in the year 2018-19, and received a gratuity of 79,80,000. While calculating exemption for gratuity for the assessment year 2019-20, statutory amount of 10,00,000 shall be reduced by earlier deduction claimed .e. 40,000. Hence, statutory deduction limit for the assessee in the AY. 2019-20 wil bet 9,60,000 only Note: Applicable in Case C and Case D Where gratuity is received from more than one employer: Where gratuity is received from more than one employer in the same previous year, the aggregate amount exempt from tax shall not exceed statutory deduction Case E: Gratuity received after death of employee The Act is silent on treatment of gratuity received after death of employee. However, on following grounds, it can be concluded that gratuity received by a legal heir shall not be taxable in the hands of the recipient Alump sum payment made gratuitously to widow or legal heir of employee, who dies while in service, by way of compensation or otherwise is not taxable under the head Salaries". [Circular No.573, Dated 21.08.1990] Unutilised deposit under the capital gains deposit account scheme shall not be taxable in the hands of legal heir [Circular No.743 dated 6/5/1996] Legal representative is not liable for payment of tax on income that has not accrued to the deceased till his death Leave salary paid to the legal heir of deceased employee is not taxable as salary. Circulars Letter No. F.35/1/65- IT(B), dated 5/11/1965). Further, leave salary by a legal heir of the Government employee who died in harness is not taxable in the hands of the reciplent Circulars No 309, dated 3/7/1981]. Taxpoint: If gratuity becomes due before the death of the assessee (no matter when and by whom received), it shal be taxable in the hands of employee. Whereas if gratuity becomes due after the death of assessee, it shall not be taxable (even in the hands of legal heir of the assessee) ILLUSTRATION 4 Mrs. X is working with ABC Ltd, since last 30 years 9 months. Her salary structure is as under: Basic 5,000 p. m Dearness allowance 3,000 p.m. On 15/12/2018, she died. State the treatment of gratuity in following cases: Case 1: Mrs. X retired on 10/12/2018 & gratuity 4,00,000 received by her husband (legal heir) as on 18/12/2018 Case 2: Husband of Mrs X received gratuity on 18/12/2018 falling due after death of Mrs. X Mrs. X is covered by the Payment of Gratuity Act