Page 164 - Group Insurance and Retirement Benefit IC 83 E- Book

For the purpose of calculation of exempt gratuity, employees may be divided into 3

categories –

(a) Government employees and
(b) Non-government employees covered under the Payment of Gratuity Act, 1972

(c) Non-government employees not covered under the Payment of Gratuity Act, 1972

In case of government employees – they are fully exempt from receipt of gratuity.

In case of non-government employees covered under the Payment of Gratuity Act, 1972 –
Maximum exemption from tax is least of the 3 below:

(i) Actual gratuity received;

(ii) Rs 10,00,000;
(iii) 15 days’ salary for each completed year of service or part thereof

Note:

Here, salary = basic + DA + commission (if it‘s a fixed % of sales turnover).
‗Completed year of service or part thereof‘ means: full time service of > 6 months

is considered as 1 completed year of service; < 6 months is ignored.

Here, number of days in a month is considered as 26. Therefore, 15 days‘ salary is
arrived as = salary * 15/26

In case of non-government employees not covered under the Payment of Gratuity Act,
1972 – Maximum exemption from tax is least of the 3 below:

(i) Actual gratuity received;
(ii) Rs 10,00,000;

(iii) Half-month‘s average salary for each completed year of service (no part thereof)

Note:
Here, salary = basic + DA + commission (if it‘s a fixed % of sales turnover).

Completed year of service (no part thereof) means: full time service of > 1 year is

considered as 1 completed year of service. < 1 year is ignored.
Average salary =10 months’ salary (immediately preceding the month of leaving

the job)/10