Question
I am about to receive gratuity on leaving my job and want to know how much of it is tax-free.
Answer
For employees covered by the Payment of Gratuity Act, gratuity is exempt from income tax up to Rs 20 lakh under Section 10(10). The exempt amount is the least of: the Rs 20 lakh ceiling, the actual gratuity received, or the amount under the statutory formula. Anything above the exempt portion is taxable as salary. The Rs 20 lakh limit is a lifetime cap across all employers, so exemption already used at a previous job reduces what remains available. Government employees enjoy full exemption. This ceiling remains in force for FY 2026-27.
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.