Exemption Snapshot
Maximum Deduction Cap
₹20,00,000 Exemption
Annual IT Act Exemption
Potential Direct Tax Savings
100% Tax Free up to 20L
Cash kept in your bank
Eligible Tax Regime
Both Old & New Tax Regimes
Budget FY 2026-27 Guidelines
How This Deduction Directly Lowers Your Monthly TDS
When you submit investment declarations to your company HR portal via Form 12BB, payroll calculates your projected annual tax liability after subtracting these statutory deductions, dividing the remaining tax evenly across 12 monthly payslips.
Frequently Asked Questions
What is the continuous service rule for gratuity eligibility in India?
Under the Payment of Gratuity Act 1972, an employee is eligible for gratuity upon completing 5 years of continuous service (defined as working at least 240 days in the 5th year, effectively 4 years and 240 days).
What is the mathematical formula used by corporate HR to calculate gratuity?
The statutory formula is: Gratuity = (Last Drawn Basic Salary + DA) x (15 / 26) x Number of Completed Years of Service.
Compare Old vs New Tax Regime for Your Salary
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