Gratuity Calculator
Work out your end-of-service gratuity and, more importantly, how much of it you actually keep. Whether your employer runs an approved fund makes a very large difference to the tax.
Rates verified 2026-10-10 against the Finance Act 2026 for Tax Year 2027 (1 July 2026 - 30 June 2027).
Implements sections 12(2)(e), Second Schedule Pt I Cl 13 of the Income Tax Ordinance, 2001.
Some figures here are not yet confirmed. Secondary sources disagree on the exemption limit for gratuity paid outside an approved fund or scheme. We apply the most conservative reading, which may overstate your tax rather than understate it. The approved-fund and approved-scheme figures are better established. Treat the result as indicative and confirm the position with the FBR or a tax practitioner before relying on it.
Basic salary, not gross — allowances are usually excluded.
30 days is the Standing Orders Ordinance baseline. Check your contract — many employers give more.
Taxable gratuity stacks on your other income, so this sets your marginal rate.
⚡ Calculations update automatically as you type
Gross gratuity
Rs 12,00,000
30 days of wages for each of 10 years, on a basic salary of Rs 1,20,000 a month.
- Exempt from tax
- Rs 12,00,000
- Taxable
- Rs 0
Gratuity from a Commissioner-approved Gratuity Fund is wholly exempt.
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Bilingual Tax Glossary(ٹیکس کی بنیادی اصطلاحات)
Quick guide to standard Pakistani tax terms in Urdu and English.
This is an estimate for general information, not professional tax advice. It does not account for every allowance, exemption or provincial levy that may apply to you. Confirm your position with the FBR or a qualified tax practitioner before acting on it.
Frequently asked questions
- How is gratuity calculated in Pakistan?
- The baseline under the Standing Orders Ordinance is 30 days of wages for each completed year of service, calculated on your last drawn basic salary. So a monthly basic of Rs 120,000 over 10 years gives roughly Rs 1,200,000. Many employment contracts are more generous, so check yours — the entitlement may be higher.
- Is gratuity taxable in Pakistan?
- It depends entirely on how your employer has arranged it. Gratuity from a Gratuity Fund approved by the Commissioner Inland Revenue is wholly exempt under Clause 13 of Part I of the Second Schedule. An FBR-approved gratuity scheme is exempt up to Rs 3,00,000. Without either approval the exemption is far more restrictive.
- What is the difference between an approved fund and an approved scheme?
- An Approved Gratuity Fund is a separate trust, formally approved by the Commissioner under Part III of the Sixth Schedule, into which the employer contributes and whose own investment income is also exempt. An approved scheme is a contractual arrangement approved by the FBR but without a separate funded trust. The fund gives the better tax outcome, which is why larger employers set them up.
- Does gratuity get taxed at my normal rate?
- The taxable portion is added to your salary income for the year it is received and taxed at your slab rates. Because gratuity is often a large one-off sum, it can push you into a higher slab in that year, which is why this calculator asks for your other income rather than quoting a standalone figure.
- Am I entitled to gratuity if I resign?
- Generally yes, after completing the qualifying period of service, though entitlement on resignation as opposed to retirement or redundancy depends on your contract and the applicable provincial labour law. Gratuity is distinct from a provident fund, and some employers offer one rather than the other, not both.
- Is gratuity the same as provident fund?
- No. A provident fund is a savings arrangement you and your employer contribute to during employment. Gratuity is a single end-of-service payment funded by the employer alone, calculated from your length of service. They are taxed under different rules and you may be entitled to both.
How the amount is worked out
The statutory baseline is 30 days of wages for every completed year of service, computed on your last drawn basic salary rather than your gross package. Allowances are usually excluded, which is why the figure is often lower than people expect.
Your contract may be better than the statutory floor — 45 or even 60 days per year is not unusual at senior levels — so the days-per-year field is adjustable. Read your appointment letter rather than assuming the minimum.
The tax treatment is where the money is
Three arrangements, three very different outcomes:
- Approved Gratuity Fund — a trust approved by the Commissioner Inland Revenue. The entire gratuity is exempt, however large.
- FBR-approved scheme — exempt up to Rs 3,00,000, with the balance taxable.
- Neither — only a small portion is exempt, and most of the payment is taxable.
For a long-serving employee the gap between the first and third options can be hundreds of thousands of rupees. If you are approaching retirement, it is worth asking HR which arrangement applies, because the answer is not obvious from your payslip.
Timing matters too
Because the taxable slice stacks on your other income for the year of receipt, a gratuity paid in a year when you also earned a full salary is taxed at your top marginal rate. Where you have any influence over the timing of a departure, that is worth modelling.
Why this page carries a warning
The exemption limit for unapproved arrangements is reported inconsistently across secondary sources, with some giving 50% or Rs 75,000 whichever is lower, others whichever is higher, and others a ten-times-larger cash cap. We have applied the most conservative reading, which may overstate your tax. If this matters to you, have the Second Schedule checked directly rather than relying on this figure.