Tax term

Gratuity

A terminal employment benefit governed by the applicable law or contract.

Paid when employment ends, gratuity draws its eligibility, salary basis and formula from the applicable law, the contract or certified standing orders, sometimes with a provident fund interacting. Because those documents differ between employers, no single entitlement figure can be quoted here. The illustrative tool in this repository’s employment calculators multiplies last monthly salary by completed years of service and by a months-per-year factor you enter, so a salary of Rs 150,000 with ten completed years at the default of one month returns Rs 1,500,000, which is a worksheet rather than an entitlement. Two mistakes repeat themselves: borrowing a colleague’s formula, and expecting the salary estimator to cover gratuity, since that estimator deliberately excludes EOBI, fund and other payroll deductions as separate items. Request the written scheme, check the service dates and salary basis used, and verify treatment with FBR.

Check the legal meaning in context and against the relevant tax year.