The gratuity Act of 1972 states that a worker can only get the loyalty incentive after five years of regular employment. The highest gratuity that can be given to a worker is Rs. 20 lakh. The gratuity becomes taxed if it exceeds the previously mentioned cap. Any gratuity paid by private employees who are not covered by the Payment of Gratuity Act of 1972 is tax-exempt up to the least of the following amounts: legal maximum of Rs. 20 lakh. Gratuity is equal to the average wage times the number of years of service. Actual tip money was given.