What is the tax treatment for gratuity and how can one calculate it?

April 17, 2024 10:46

Gratuity taxation varies depending on the category of the employee. Here's a breakdown:

Category	Tax Treatment
Government Employee	Fully Exempt
Non-Government Employee Covered under Gratuity Act 1972	Least of the following Actual Gratuity received Rs. 20,00,000 Number of completed years of service or part thereof in excess of 6 months * 15/26 * last drawn salary
Non-Government Employee Not Covered under Gratuity Act 1972	Least of the following Actual Gratuity received Rs. 20,00,000 Half of average salary * completed years of service

Please note that "Average salary" includes Basic Salary, Dearness Allowance (D.A.), and percentage-wise fixed commission on turnover.

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