A group of retired scientists from the National Centre for Earth Science Studies (NCESS), Trivandrum has successfully recovered their full gratuity entitlement after a prolonged legal battle. According to reports from Upstox, the scientists, including the querying individual who worked from 1986-2013, were initially given only ₹10 lakh gratuity despite being eligible for full gratuity without a cap. After several rounds of litigation in the High Court of Kerala, the court directed NCESS to pay the balance gratuity with 10% simple interest. The court's directive represents a significant victory for these retired scientists after their long legal struggle.
The interest component of delayed gratuity payments does not enjoy any tax exemption and is treated as taxable income under 'Income from other sources'. As reported by Upstox, this interest is taxed as interest, not salary, because it is paid for the delayed payment of gratuity and not for services rendered in the past. The interest must be added to the taxpayer's other income of the year and taxed at the applicable slab rate. This treatment applies regardless of whether the gratuity was delayed due to employer negligence or legal proceedings.
Taxpayers with taxable income exceeding ₹10,000 annually must pay advance tax, but senior citizens are exempt from this requirement if they have no income taxable under the 'Profits and Gains of Business or Profession' head. According to Upstox, tax liability can be discharged while filing the Income Tax Return, but not after the due date for filing the ITR. The taxpayer has until July 31, 2026 to pay taxes and file their ITR to avoid interest on tax payable. The government's new Labor Codes may further impact tax compliance as they consolidate 29 labour laws into four new codes, potentially affecting gratuity calculations and tax treatment.
The dispute arose when NCESS was taken over by the Ministry of Earth Science on January 1, 2014, with all assets, liabilities, and manpower transferred. As reported by Upstox, the retired scientists, including the querying individual, questioned the gratuity ceiling in the High Court of Kerala, citing earlier High Court judgements and orders. The court's directive to pay the balance gratuity with interest represents a significant victory for these retired scientists after their long legal struggle, highlighting the importance of employee rights in retirement benefits.
