How is Gratuity Taxed in India?
Types | Tax Implication |
|---|---|
| Central/state government, defense, and local bodies | The entire amount received will not attract any tax. |
| Employees subject to the provisions of the Act | The following types of organizations are exempted from paying taxes on gratuity: central/state government, defense, and local bodies. For employees covered under the Act, the least of the following amounts is exempt from taxation: i) Actual gratuity received ii) ₹20 Lakh iii) (15 x last drawn salary x number of completed years of service) / 26 For employees not covered under the Act, the least of the following amounts is exempt from taxation: i) Actual gratuity received ii) ₹10 Lakh iii) (15 x average salary for the last 10 months x number of years employed) x 30 |
| Employees covered by the Act’s regulations | The least amount that is exempted from taxation for employees not covered under the Payment of Gratuity Act is the minimum of the following: i) Actual gratuity received ii) ₹10 Lakh iii) (15 x average salary for the last 10 months x number of years employed) x 30 |