Gratuity Calculation

hi

3.5lacs, which is fixed amount to get exempt from tax.

if company is in recognised P.F act the formula remain the same to calculate Gratutity.

if it is unrecognised the formula is =last salary drawn*1/2*no. years served.

       3.50 LACSIS THE MAX.LIMIT OF EXEMPTION THAT CAN BE CLAIMED U/S. 10 (10).
        EVEN IF THE SERVICE IS RENDERED FOR MORE THAN 12 YEARS, FOR THE PURPOSE OF GRATUITY CALCULATION AVERAGE SALARY FOR LAST 10YEARS HAS TO BE CONSIDERED.
         IF THE EMPLYEE IS COVERED UNDER PAYMENT OF GRATUITY ACT THAN THE CELEING LIMIT OF 3.50LACS IS FOR EVERY GRATUITY RECD. I.E. FROM MORE THAN ONE EMPLOYER.
        ANY FURTHER CLARIFICATION IF REQUIRED ARE MOST WELCOMED.

350000 is one of the exemption for IT calculation only not for limit of gratuity.

It is the company going to calculate the formula is covered under the gratuity Act means

Last drawn Basic X 15/26 X No.of Years Services (it includs more than six month as a convert into one Year).

If not covered under the Gratuity Act

Average Basic for last ten month salary X 1/2 X No. of Years of Services (not include the part there on).

for calculation of salary while calculating TAxable gratuity

Salary means:-

For (covered under gratuity act)

last drawn basic+DA+commision fixed %age on turnover

for (not covered)

Average salary of last 10 months prior to the month of retirement

Three lakh fifty thousand(3.5lacs) is the maximum limit to get absolved from tax. If the company is recognized under Provident Fund i.e PF act the formula will be =

Last drawn salary x 15/26 x total number of years of service.

If not covered under the act then the formula would be:

Average basic salary for the last ten months X 1/2 x the number of years of service