The statutory gratuity formula uses Basic plus DA as the base, divides by 26 (not 30 or the actual days in a month), and multiplies by 15 days per year of service. Partial years above 6 months are rounded up. For example, 5 years and 8 months is treated as 6 years. The maximum tax-exempt gratuity for private sector employees is Rs 20 lakh (Budget 2019).
Gratuity accrues throughout the employee’s tenure but is paid only on exit. Zoho Payroll shows the accrued gratuity liability in payroll reports, which helps finance teams provision the expense. When an employee exits, the final settlement screen in Zoho Payroll computes the exact gratuity payable based on service duration and last Basic.
Gratuity received by private sector employees is exempt from income tax up to Rs 20 lakh under Section 10(10). Amounts above this limit are taxable. Zoho Payroll computes the taxable and exempt portions when processing the final settlement and includes the figures in the relieving payslip and Form 16 Part B.
Gratuity is a statutory lump-sum payment in Zoho Payroll made to employees who have completed at least five years of service. The Payment of Gratuity Act formula uses last drawn Basic divided by 26, multiplied by 15 days per year of service. Zoho Payroll computes this during full and final settlement.
Gratuity up to Rs 20 lakh is tax-exempt for private sector employees under Section 10(10). Amounts above this threshold are taxable. Zoho Payroll calculates the exempt and taxable portions during final settlement and includes the figures in the employee’s Form 16 for the year of exit.
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