Fact-check notes
Last fact-checked: 2026-05-27
Transition rule: AY 2026-27 covers FY 2025-26 and continues under the Income-tax Act, 1961. The Income-tax Act 2025 Tax Year language applies for income earned from 1 April 2026 onward.
This Batch 12 page avoids treating future-dated payroll/form/rule changes as final filing advice. Verify the active form, notification, payroll circular or portal utility before implementation.
What this covers
Gratuity is an exit/retirement benefit. Tax treatment depends on employer type, whether the employee is covered by the Payment of Gratuity Act, completed service and lifetime exemption already used.
- Government gratuity is generally fully exempt.
- For covered private employees, exemption is the least of actual gratuity, formula amount and notified monetary cap.
- Five years service is usually required, with death/disability exceptions.
Who this is for
- Employee resigning after long service.
- Retiring private-sector employee.
- Government employee receiving gratuity.
- CA checking Form 16 exemption.
Documents and data to verify
- Gratuity letter.
- Last drawn salary.
- Service certificate.
- Prior gratuity exemption used.
Common mistakes to avoid
- Ignoring cumulative lifetime cap.
- Counting partial years incorrectly.
- Assuming gratuity before 5 years is exempt.
- Using wrong formula for non-covered employees.
How to proceed
- Confirm the applicable year, taxpayer type, form, state and portal status before acting.
- Reconcile portal data with payslips, books, invoices, Form 16/26AS/AIS, GST returns, EPFO records or contracts.
- Prepare a written computation, filing note, checklist or response with assumptions clearly stated.
- Download acknowledgements, challans, workings and evidence after filing or submission.
FAQs
Can WorkIndex help with this?
Yes. Post the facts and documents; relevant experts can quote for filing, advisory, reconciliation, registration, appeal support or ongoing compliance.
Is this page final legal advice?
No. Use it to prepare. A professional should verify the active law year, notification, portal utility and records before filing or taking a tax position.
What should I mention while posting?
Mention the year, state, form, deadline, amount involved, documents available, portal status and whether you need filing, correction, advisory or representation.