How this works
Approved fund: fully exempt, no cap
If your gratuity is paid through a fund that's been formally approved by the Commissioner Inland Revenue under the Sixth Schedule, the entire amount is tax-free — there's no upper limit. This is confirmed directly by FBR's own public clarification, which states no tax has been imposed on gratuity fund payments.
Unapproved or direct payment: a much smaller exemption
If your employer pays gratuity directly, without an approved fund, only the lesser of 50% of the amount or Rs 75,000 is exempt. Everything above that is added to your other taxable income for the year and taxed at your normal FBR slab rate — not a special flat rate.
Government employees are a separate case
Federal, provincial, and local government employees receive full tax exemption on gratuity paid according to their official service rules, regardless of fund status. This calculator covers private-sector employees under approved vs. unapproved schemes.
Assumptions & limits
Assumes standard private-sector employment. Doesn't model government-employee exemptions or unusual scheme structures. Figures are for guidance only, not tax advice — confirm your fund's approval status with your employer before relying on this.