LIVE GST Certification Course by CA Arun Chhajer begins 21st April. Register Now!!

Gratuity Calculation

Amit (Service) (457 Points)

01 January 2009

Hi All,

My query is regarding the calculation of gratuity for non-govt employee.

As I learnt for non govt employee working more than 05 years in same organization , gratuity calculation will be

= Last drawn salary x 15/26 x completed years of service

For employee who completed more than 12 years, does the formula changes to whole salary ?

Whether the 3.50 LACS slab is only for taxability purpose ?

Please advise

Amit

Reply
Follow
Share

5 Replies

hari2009 (Executive) (224 Points)
Replied 01 January 2009

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.

HARSHIT KABRA (STUDENT) (81 Points)
Replied 01 January 2009

       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.

R.Suresh (Sr. Executive) (394 Points)
Replied 02 January 2009

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).

(Guest)

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

Suveera Patil (nil) (48 Points)
Replied 02 June 2022

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