return to news
  1. Upstox
    /
  2. News
    /
  3. Personal Finance News
    /
  4. Tax
    /
  5. ₹20 lakh gratuity exemption: Does it reset with every job or stay for life?

Personal Finance News

₹20 lakh gratuity exemption: Does it reset with every job or stay for life?

balwant jain
By Balwant Jain

3 min read | Updated on April 23, 2026, 12:36 IST

Google
SelectUpstoxas yourPreferred news source
Copy link
Twitter Page
Linkedin Page
Whatsapp Page

SUMMARY

Confused about gratuity tax rules? Here’s how the ₹20 lakh exemption works across jobs, what’s taxable, and what you can actually claim.

₹20-lakh-gratuity-exemption

Gratuity. | Image: Shutterstock.

If you have spent 45 years building a career across multiple companies, you might expect your hard-earned gratuity to be tax-free every time you move on. While your employer is perfectly free to pay you a generous gratuity exceeding the legal minimum, the income tax department has a very strict "lifetime" cap on what you can keep tax-free. Here is the reality of how that ₹20 lakh limit follows you from one job to the next.

Open FREE Demat Account within minutes!
Join now

Today's Q&A explains such details in response to a query by a reader.

Question: As I understand, gratuity is exempt from tax upto ₹20 lakh. Can an employer, covered under Payment of Gratuity Act, give more than ₹20 lakh as gratuity and the amount in excess of ₹20 Lakhs may be taxable? If someone has worked under three different during his entire career of 45 years, and has received gratuity of ₹18 lakh each from all 3 employers in three different financial years, will he get exemption of ₹54 lakh during his entire life, or will the exemption be limited to ₹20 lakh during his lifetime? Request your opinion.
Answer: Gratuity received by government employees are fully exempt in the hands of the recipient without any upper monetary limit. However, the gratuity received by those who are not covered above is exempt upto the limits prescribed under the Gratuity Act, subject to a maximum of Rs. 20 lakhs.

The limits prescribed under the Gratuity Act are the minimum gratuity which an employer is required to pay to his employee, and there are no restrictions on an employer giving a higher gratuity than what is prescribed under the laws.

The monetary exemption limit of 20 lakhs is applicable on an aggregate basis for the aggregate of gratuity received by a person during his entire career from one or more employers.

So, in the case cited by you, the employee will get a full exemption for 18 lakhs in respect of gratuity received from the first employer. For the gratuity of 18 lakhs received from the second employer he will get the exemption for 2 lakhs only, and the balance gratuity of 16 lakhs will become taxable in his hands. The gratuity of ₹18 lakh received from the third employer will be fully taxable.
Have a personal finance, mutual fund, or income tax query? We will try to get them answered by experts. Write to sangeeta.ojha@rksv.in
For all personal finance updates, visit here
Disclaimer: The views and opinions expressed above are those of respective experts/commentators and do not reflect the views of Upstox. The above Q&A is only for informational purposes and should not be considered investment or tax advice from Upstox. Please consult a tax expert for your complex tax problems.

About The Author

balwant jain
Balwant Jain is a Mumbai-based tax and investment expert.

Next Story