How to Calculate Taxable Portion of Gratuity

Aug 10, 2018 | 11 months ago | Read Time: 1 minute | By iKnowledge Team

Spent more than five years in a company? Now, you have one more income that you need to calculate tax on — gratuity.

When it comes to categorisation for gratuity, following three are the different types of employees with their taxable portion of gratuity—

Government employees:

Completely exempt from tax on gratuity

Employee working for employer covered by the Payment of Gratuity Act

Pay the least of either of the following:

  1. 15 days’ of last-drawn salary × Number of years worked* × Last drawn salary
  2. Rs 10 lakh
  3. Entire gratuity

*The number of years is rounded off to the nearest number. Thus, 12 years and 5 months is considered to be 12 years, while 12 years 7 months is considered to be 13 years.

Employee working for employer not covered by the Payment of Gratuity Act

  1. 15 days’ salary (from the last drawn) × Number of years worked* × Last drawn salary
  2. Rs 10 lakh
  3. Entire Gratuity

*The number of years not completed are discarded. So, 12 years and 5 months is considered to be 12 years. Even 12 years and 11 months is considered to be 12 years.

Visit our website for tax calculators and other tools that could help you plan your retirement. You could visit us to buy a life insurance plan from Aegon Life.

To know about AegonLife’s saving plans and other products like ULIPs, visit our home page.

Advt. no.: IA/Jul 2018/4272


Calculate premium for your Term Plan

  • Y N
    • Annual Income
    • Sum Assured
    • Select Cover Upto Age
    • Name
    • Mobile
    • Email ID
Your Annual Premium for Aegon Life iTerm Insurance Plan
Prev
What You Need to Know About Bronchial Asthma?
Next
Plan on Time to Maximise Year-End Savings

RELATED ARTICLES


investment guide
  • Feb 18, 2019

Best way to Invest Money in Your 20s

  • Read Time: 3 minutes

tax savings
  • Feb 18, 2019

EEE, ETE & EET Investments: Tax Saving Guide

  • Read Time: 4 minutes

GST & Tax
  • Feb 15, 2019

Relation Between High Fuel Prices & Indirect Taxes

  • Read Time: 3 minutes

  • Feb 01, 2019

Interim Budget 2019 and Vote on Account

  • Read Time: 6 minutes

  • Jan 24, 2019

Income tax act 1961

  • Read Time: 4 minutes