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Former Member
May 28, 2008 at 09:39 AM



Where Employee is serving more than 4.5 yrs of service

Gratuity payable will remain unchanged but tax on gratuity will be slightly differ which is as :-

e) Taxable gratuity =Gratuity Payable (b) - (Basic Salary * 15/26*complete no of yrs service r/o )

(here only difference amount of above reflect on which tax would be imposed)


with the help of an example it would be very clear to understand.....................................

Suppose X & Y Employee left an organisation after 3.5yrs & 4.51 yrs of service correspondingly,at the time of leaving Basic Salary drawn by both was Rs.5000/-

Gratuity payable in all condition would be calculated with the help of formulla;- i.e Basic Salary15/22no of complete yrs of service

=500015/223 = Rs 10,227/-

c)Taxable Gratuity = 10227- 5000*15/30 *3)

= 10227- 7500 = Rs.2727

---employee is serving complete yrs of service which is 3 Yrs

Thus while calulatin the grautiy amount would not be differ but for the taxation point of view tax will be imposed on Rs 2727

d) Taxable Gratuity

---employee is serving complete 4yrs & .51 month which indicate r/o i.e for the purpose Gratuity Employee would be entitled to get the benefit of 5Yrs Gratuity .

Thus Gratuity payable for the employee would be Basic Sal * 15/22* complete no of yrs service r/o

= 500015/225=Rs.17,045/-

In this case Taxable Gratuity would be =17045- 500015/265 = Rs 17045-14423

= Rs. 2,622