Taxability of Gratuity ?

Gratuity refers to the amount that an employer pays his employee, in return for services offered by him to the company.

Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,—

(a) on his superannuation, or

(b) on his retirement or resignation, or

(c) on his death or disablement due to accident or disease

Provided that the completion of continuous service of five years shall not be necessary where the termination of the employment of any employee is due to death or disablement.

Taxability of gratuity

(A) Gratuity received during the employment – fully taxable for all employees ( govt or non- govt employees)

(B) Gratuity received at the time of retirement –

Note:

Salary p.m. = Basic salary p.m. + Latest D.A (both)

Average Salary p.m. (Don’t include month of retirement)

​Average basic salary of last 10 months​Average basic salary of last 10 months	​XXX
(+) Average DA (in terms) of last 10 months	​XXX
(+) Average turnover commission of last 10 months	​XXX
​Average salary	​XXX