This Gratuity Calculator lets you calculate Gratuity Tax Exemption. Gratuity is the amount of payment made by an employer to an employee in appreciation of the past services rendered by the employee which is received at the time of retirement or in the event of death. The maximum gratuity tax exemption that an employee can avail is Rs. 20,00,000.
It is the amount received by the salaried person from their employer as mark of recognition for the long term service to the organization. An employee who has worked in an organization for a minimum period of 5 years is eligible for gratuity.
But not everyone is aware that gratuity is part of our salary. Gratuity is a reward paid by employer to Employee for services rendered by him. In simple words it is a retirement benefit received by employee when he leaves his job.
An employee who completed 5 or more years of service is eligible for gratuity. This condition of 5 years of service is not applicable in case of death or any disability of an employee.
After completing five years of continuous service, you will be eligible to receive the gratuity benefit. It is payable:
Gratuity received by you on your retirement or during your service period is taxable under the head "Income from Salary. In case of death of employee, Gratuity will be paid to legal heir/nominee of an employee which is taxable under the head” Income from other sources".
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Gratuity is taxable when it is received under the head Income form salary. An employee can claim exemption maximum up to Rs. 20,00,000. However, calculation of gratuity varies according to various categories of employees as follows:
You can use our free Gratuity calculator to calculate your exemption amount.
Categories |
Tax treatment |
|---|---|
| Government employee | Fully Exempt |
| Non-government employee covered under Payment of gratuity act 1972 |
Maximum exemption from tax – Least of the following:
|
| Non-government employee not covered under Gratuity Act 1972 | Maximum exemption from tax –
Least of the following:
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No, an employee will be eligible for gratuity only if he serves for at least 5 years in a company. However there is a Madras high court ruling which states that an employee is eligible for gratuity only if he completed 240 days in the fifth year.
Tenure of 5 years of service is not applicable in case of death or any disability of an employee. Still confused? Need experts opinion? Contact us
Employer has a right to forfeit gratuity in case employee is being terminated due to misconduct or any other act of violence.
All establishments where 10 or more workers are employed in any day of preceding 12 months are covered under this act.
Both commercial and non-commercial establishment like hospital, educational institutes are covered under the act.
Yes, Contractual employees are also eligible for gratuity. Contractor is responsible to pay gratuity to employees. In case Contractor denies, responsibility arises on principal employer.
Employer is responsible to determine the gratuity and paid the same within 30 days of gratuity became payable.
After completing one year of service, an employee is eligible to file nomination in Form F. Download Form F
