Gratuity tax calculator
When you retire or lose your job, some lump sums are taxed apart from your salary at their own lower rates. This calculator applies those rates.
Add up what you received in the same year of assessment: retiring gratuity, commuted pension, ETF paid at or after retirement, and compensation for loss of employment paid under a scheme that applies to all staff.
How it's calculated
- The amounts are added together for the year.
- Up to Rs. 10,000,000 the rate is 0%.
- From Rs. 10,000,000 to Rs. 20,000,000 the slice above the first limit is taxed at 6%.
- Above Rs. 20,000,000 you pay Rs. 600,000 plus 12% of the excess.
An example
A gratuity of Rs. 12,000,000 and an ETF payment of Rs. 3,000,000 add up to Rs. 15,000,000. The tax is 6% of Rs. 5,000,000, so Rs. 300,000.
Frequently asked questions
Is my EPF withdrawal included?
The list in the Inland Revenue Act covers commuted pension, retiring gratuity, compensation for loss of office and ETF at retirement. EPF is not in that list, so this calculator leaves it out. IRD Tax Table No. 03 also lists payments from an approved or regulated provident fund as exempt.
Why does my employer hold back more than this tax?
IRD Tax Table No. 03 tells the employer and the ETF to retain 12% of whatever goes above Rs. 5,000,000. You then ask the IRD Clearance and Directions Unit for a direction within 90 days, and the employer follows it.
Which compensation counts?
Only compensation for loss of office or employment paid under a scheme that the Commissioner General considers to apply uniformly to all employees of that employer.
Is this added to my salary for the tax bands?
No. The Act taxes these payments at their own rates, and only the rest of your taxable income goes through the normal income tax bands.
Key terms
- Retiring gratuity
- The lump sum an employer pays when you leave after years of service.
- Commuted pension
- Part of a pension taken as one payment instead of monthly.
Up-to-date official data
Data checked against the official source on .
We check the official sources automatically, every day.
- Inland Revenue DepartmentConsolidated text of the Inland Revenue Act, No. 24 of 2017 (amendments up to 31 March 2025)
- Inland Revenue DepartmentAPIT Tax Table No. 03 (2025/2026): once-and-for-all payments (terminal benefits)