As per section 10(10)(iii), exemption in respect of gratuity in case of employees not covered by the Payment of Gratuity Act, 1972 will be lower of following :
Half month’s salary for each completed year of service, i.e.,
[Average monthly salary × ½] × Completed years of service. .
Gratuity actually received.
1) Average monthly salary is to be computed on the basis of average of salary for 10 months immediately preceding the month of retirement.
2) Salary for this purpose will include basic salary, dearness allowance, if the terms of service so provide and commission based on fixed percentage of turnover achieved by the employee.
3) While computing years of service, any fraction of a year is to be ignored.