Case A: Gratuity received during continuation of service Gratuity recelved during continuation of service is fully taxable in the hands of all employee (whether Government or non-Government employee) Case B: Gratuity received at the time of termination of service by Government employee Gratuity received at the time of termination of service by Government employee is fully exempt from tax u/s 10(10)0. Taxpoint: Government employee, here, includes employee of the Central or the State Government or local authority but does not include employee of statutory corporation. Case C: Gratuity received at the time of termination of service by non-government (including foreign gov- ernment) employee, covered by the Payment of Gratuity Act In such case, minimum of the following shall be exempted from tax u/s 10(10)(): 1. Actual Gratuity received: 2 20,00,000 or 3. 15 working days salary for every completed year of service [Arithmetically, 15/26 * Completed year of service Salary p.m.] Notes a) Completed year of service includes any fraction in excess of 6 months. (e.g. 7 years 9 months will be treated as 8 years: 7 years 5 months will be treated as 7 years and 7 years 6 months will be treated as 7 years) b) Salary here means + DA, last drawn In case of an employee of a seasonal establishment 15 days shall be replaced by 7 days ().e.,/20 * Completed year of service x Salary p.m.) In case of a piece-rated employee: 15 days salary would be computed on the basis of average of total wages (excluding wages paid for over time) received for a period of 3 months immediately preceding the termination of his employment f10 ILLUSTRATION 2 Ashok, an employee of ABC Ltd., receives 2,05,000 as gratuity under the Payment of Gratuity Act, 1972. He retires on 10th September, 2018 after rendering service for 35 years and 7 months. The last drawn salary was $2,700 per month Calculate the amount of gratuity chargeable to tax