TDS Calculation for Gratuity

This article prepared for academic purpose not a professional advise 

 detailed illustration of the  — specifically for a non-government employee covered under the Payment of Gratuity Act, with actual numbers.

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🎯 Scenario:

• Employee Name: Mr. Rajesh

• Employment Type: Private Sector (Non-Government)

• Covered under Payment of Gratuity Act: ✅ Yes

• Years of Service: 22 years

• Last Drawn Salary (Basic + DA): ₹35,000 per month

• Gratuity Received: ₹8,50,000

• Other Salary Income: ₹0

• Deductions under 80C (PPF, LIC, etc.): ₹50,000

🧾 Step-by-Step TDS Calculation – Gratuity

1️⃣ Gratuity Exemption – Section 10(10)

For employees covered under the Payment of Gratuity Act, exemption is the least of:

Option	Calculation	Amount (₹)
a) Statutory limit	Fixed	20,00,000
b) Actual amount received	Given	8,50,000
c) 15/26 × Last drawn salary × Years of service	(15/26) × 35,000 × 22	4,43,077

✅ Exempt Gratuity = ₹4,43,077 (least of above)
📌 Taxable Gratuity = ₹8,50,000 – ₹4,43,077 = ₹4,06,923

2️⃣ Other Income & Deductions

Item	Amount (₹)
Taxable Gratuity	4,06,923
Other Salary Income	0
Gross Total Income	4,06,923
Less: 80C deduction	50,000
Net Taxable Income	3,56,923

3️⃣ Tax Computation (Old Regime FY 2025-26)

Slab	Rate	Tax
Upto ₹2,50,000	Nil	0
₹2,50,001 – ₹3,56,923	5%	₹5,846
Total Tax		₹5,846
Add: 4% Cess		₹234
Total TDS Liability		₹6,080

✅ TDS to be deducted under Section 192 = ₹6,080