Gratuity Calculation Formula 2023

May 16, 2023 Rajeev Kumar

Salaried employees receive gratuity payment as a part of their salary structure. Read on to know the formula and how it is taxed.

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Gratuity calculation Formula: (15 X Your Last Drawn Salary x Tenure of working)/26.

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The Salary considered for gratuity calculation includes Basic Pay + Dearness Allowance.

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But for private employees, only basic pay can be considered as salary for gratuity calculation as they don’t get DA.

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For example, if your salary (basic pay) is Rs 50,000 and you have worked for 10 years, the gratuity as per the formula will be Rs 2,88,462.

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Gratuity received by employees of Central and State governments, local authorities and members of defence services is fully tax-free.

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Gratuity received during the employment is fully taxable in the hands of employees, including Government and Private.

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For private employees covered by gratuity act, up to Rs 20 lakh of gratuity amount can be tax-free.

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