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  1. Gratuity of central govt employees is fully tax exempt.

    No need to show this as income in ITR.

    When an employee retires, he receives certain retirements/terminal benefits. Such benefits are taxable under the head “Salaries” as “Profits in Lieu of “Salaries” (see section 17(3) unless specifically exempted under any other provisions of the Income-tax Act. However, most of such receipts have been either wholly or partly exempted from tax under Section 10 and as such do not enter into the computation of total income.

    Briefly tax treatment of these terminal benefits is discussed in the site below:

    http://www.incometaxindia.gov.in/publica…

    Also see http://www.etaxindia.org/2010/02/income-…

    HMT