Dear Subha,
Gratuity Exemption
(i) Exemption in case of employees who received gratuity under payment of gratuity Act, 1972 the minimum of the following amount is exempt from tax.
(a)The amount Gratuity actually received.
(b)15 days salary for every completed year of service
(c)Rs. 3,50,000/-
Note:
1. Salary means- Basic + DA
2. For calculating completed year of service , more than 6 months shall be considered as completed year. A period of 6 months or less than 6 months shall be ignored.
3. 15 days salary shall be calculated as below. ie. (Basic+DA)*15/26
ii) Exemption in case of other employees, the minimum of the following amount is exempt from tax.
(a)The amount Gratuity actually received.
(b)Half month’s average salary for every completed year of service
(c)Rs. 3,50,000/-
Note:
1. Salary means- Basic + DA
2. In calculating completed year of service, part of the year whether more or less than 6 months, will be ignored.
3. Average salary is to be calculated on the basis of the average salary for last 10 months.
General Note for both categories:
1. Gratuity received during the service is fully taxable.
2. Where an employee had claimed gratuity exemption earlier employment, then the maximum limit Rs. 3,50,000/- shall be reduced by the amount of exemptions availed earlier years.
Rgds,
Suresh Ramalingam