Is Gratuity Taxable in India?

How the exemption works, conceptually

Say your gratuity works out to ₹8,00,000. Whether that's fully exempt or partly taxable depends on:

• Your category — government employees are treated differently from private-sector employees.
• The statutory exemption limit for your category, as currently in force.
• A formula-based cap tied to your last-drawn salary and years of service, for employees covered under gratuity provisions.

Broadly, the exempt amount is whichever is lowest among: the gratuity you actually received, the current statutory limit, and the formula-based figure. Any amount above that exempt portion is added to your taxable income and taxed at your slab rate.

The ₹20 lakh limit for private-sector employees

For private-sector employees, the statutory exemption limit is ₹20 lakh — a cumulative lifetime figure across your entire career, not ₹20 lakh per employer. We re-verified this directly against incometaxindia.gov.in rather than assuming it was still current; it is, and the new labour codes haven't changed it. See the ₹20 lakh gratuity tax exemption limit for the full citation and a worked example. Government employees, separately, generally get full exemption with no cap at all.

This is separate from eligibility and calculation

The new labour codes govern who qualifies for gratuity and how much it comes to — see gratuity eligibility rules in India, the gratuity formula (15/26) explained, or look up a rough figure on the gratuity calculation chart. Income tax treatment of what you receive is a separate topic, governed by tax law, not the labour codes.