Calculate Taxable amount of Gratuity paid to Government employees or other employees covered under Gratuity Act 1972 or not covered under Gratuity Act 1972 as per the provisions of Indian Income Tax Act / Rules
Exemption in this case will be lower of the following amounts :
(*) 7 days in case of employee of seasonal establishment.
(**) Last drawn salary including DA but excluding any bonus, commission, HRA, overtime and any other allowance, benefits or perquisite.
(^) The formula is based on the 15 days of last drawn salary for each completed year of service or part thereof in excess of six months. If an employee has worked for 20 years 7 months, the years of service will be taken as 21. However, if an employee has worked for 20 years 5 months, the years of service will be taken as 20.
Exemption in respect of gratuity will be least of the following :
[ Average monthly salary (**) x ½ ] x Completed years of service (^^).
(**) Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the MONTH (not the day) of retirement. The salary means basic salary, dearness allowance, and commission received on sales.
(^^) This formula is based on the 15 days of last drawn salary for each completed year of service. If an employee has worked for 20 years 7 months, the years of service will be taken as 20 and not 21.
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