![]() Any other eligible private employee whose employer is covered under the Payment of Gratuity Act.The amount of gratuity received by any government employee (whether central/state/local authority) is exempt from the income tax.The tax treatment of the gratuity amount depends on the type of employee who has to receive the gratuity. What are the Taxation Rules for Gratuity? You have rendered continuous service of 7 years and the employer is not covered under the Gratuity Act. The formula is: (15 * Your last drawn salary * the working tenure) / 30.įor example, you have a basic salary of Rs 30,000. For employees whose employer is not covered under the Gratuity Act, the gratuity amount would be calculated as per the half-month salary on each completed year of service.Otherwise, its for 16 years if it happens to be 16 years 4 months. Suppose your tenure of service is 16 years 7 months, then you receive the gratuity for 17 years. If the number of years you have worked in the last year of employment is more than six months, then it will be rounded to the nearest figure. Any excesses would be treated as ex-gratia. ![]() The amount of gratuity = 15 * 30,000 * 15 / 26 = Rs 2,59,615Īs per the Gratuity Act, the amount of gratuity cannot be more than Rs 20 lakh. Your last drawn basic salary along with dearness allowance was Rs 30,000. Where n = Tenure of service completed in the companyī = Last drawn basic salary + dearness allowanceįor example, you have worked with the XYZ company for a period of 15 years. The amount of gratuity for employees whose employer is covered under the Gratuity Act can be calculated using the formula:.Gratuity Calculation – What is the Formula for Calculating the Gratuity? ![]()
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