Gratuity Tax Calculator: Find out your tax liability on gratuity income; check calculation

Gratuity Tax Calculator: Have you received a gratuity payment from your company and want to know the tax liability on it. Your gratuity money is an income and is therefore taxable. Want to know how much will be your tax liability on the gratuity income that you have received. We will do the math for you.

People who have completed at least five years of service in any company and are planning to change the organization or are about to retire from their jobs are entitled to gratuity. This is an important part of the salary structure of any employee and ultimately, goes to provide a big lump sum amount in their hands. As per Section 4(1) of the Payment of Gratuity Act 1972, an employee becomes eligible for gratuity only after completion of 5 years of continuous service with the same establishment.

The government exempts gratuity income of Rs 20 lakhs for those employees who are covered under the Payment of Gratuity Act. Earlier, gratuity income up to Rs 10 lakhs was exempted from tax but the exemption was raised to Rs 20 lakhs after the amendment in the Act.

Zee Business will teach you how to calculate your Gratuity amount.

Gratuity Calculator
Calculation of amount of gratuity for employees not covered under the Act
Gratuity = Last 10 month’s average salary (basic + DA) X number of years of employment X 1/2;

For employees who are covered under the gratuity act, gratuity income up to Rs 20 lakhs is exempted from tax. For those, who are not covered, the exemption is allowed up to Rs 10 lakhs. You can calculate the tax liability on your gratuity income by using the above calculation formula.

Let us assume that you have earned an average of Rs 110000 (basic +DA) in the last 10 months of your service with a particular company and you have worked for 20 years.

Gratuity received = 110000 X 20 X 1/2 = 1100000 (11 lakhs). Since income upto 10 lakhs is exempted. So your taxable income is just Rs 1 lakh.

You can also go to the income tax department website (https://www.incometaxindia.gov.in/Pages/tools/Gratuity-calculator.aspx) and calculate the taxable gratuity income by following instructions.

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#mute While companies are expected to give gratuity dues to employees in a fair and just manner, it is better to know what you are entitled to so that no clerical or administrative error leads you to get a lesser amount.