Formula: (Basic + DA) × 15 × Completed Years ÷ 26  |  Max exempt: ₹20,00,000 u/s 10(10)(ii)

Payment of Gratuity Act, 1972 & Social Security Code 2020

Eligibility: Minimum 5 years of continuous service.
Exception: Death / disability — no minimum period.
Factory workers: 4 years + 240 days in 5th year = eligible.

Fixed-Term Employees (SSC 2020):
Pro-rata gratuity even if service < 5 years (where State-notified).

Tax Exemption — Sec 10(10)(ii):
Private sector: Exempt up to ₹20,00,000. Amount above taxable at marginal rate.
Government employees: Fully exempt.

Payment Timeline:
Employer must pay within 30 days. Delay attracts interest.

⚠ Collect Form I (application) from employee / nominee. Update nominee via Form F.

Relief = Additional tax on arrear this year − Tax on arrear if paid in the year it belonged to

Section 89(1), IT Act 1961 | Rule 21A | Form 10E

Arrears received in a year different from when earned attract higher tax due to slab progression. Section 89(1) provides relief to neutralise this additional burden.

Steps:
① Tax on (current income + arrear) at current year rates
② Tax on current income at current year rates
③ Extra tax = ① − ②
④ Tax on (past income + arrear) at past year rates
⑤ Tax on past income at past year rates
⑥ What tax would have been = ④ − ⑤
Relief = ③ − ⑥

⚠ Form 10E is mandatory — file on incometax.gov.in before submitting ITR. Without it, relief is disallowed.

📅 FY 2025-26 New Regime slabs (Budget 2025):
0-4L @ 0% | 4-8L @ 5% | 8-12L @ 10%
12-16L @ 15% | 16-20L @ 20% | 20-24L @ 25% | 24L+ @ 30%
Rebate 87A: Zero tax up to ₹12L taxable income