Question 1

How is gratuity calculated in India?

Accepted Answer

Gratuity = (15 × last drawn salary × completed years of service) ÷ 26, where last drawn salary is Basic + Dearness Allowance per month. Gratuity is payable after 5 years of continuous service and is capped at ₹20,00,000.

Question 2

Who is eligible for gratuity?

Accepted Answer

An employee becomes eligible for gratuity after completing 5 years of continuous service with the same employer. The 5-year rule is waived in case of death or disablement.

Question 3

Is gratuity taxable?

Accepted Answer

For employees covered under the Payment of Gratuity Act, gratuity up to ₹20 lakh is exempt from income tax. Any amount above the exemption limit is taxable as per your income tax slab.