Question
How is gratuity taxed for government versus private employees?
Answer
Bottom line: Government gratuity is fully exempt; for private employees it is exempt up to ₹20 lakh.
1. Government
Fully exempt, with no ceiling.
2. Private (Gratuity Act)
Least of the actual gratuity, ₹20 lakh, or 15 days' salary per completed year (the 15/26 formula).
3. Lifetime limit
The ₹20 lakh is an aggregate across all employers.
Compute yours with our Gratuity Calculator.
This answer is general information based on the law as it stood when written and is not professional advice on your specific situation. Verify the current position and consult a qualified professional before acting. See our disclaimer.