The taxability of retirement benefits like PF and Gratuity depends on the type of employee and the conditions specified in the Income Tax Act. For Government employees, both PF and Gratuity are fully exempt from tax. For non-Government employees, Gratuity is exempt up to a limit of Rs 20 lakh. PF is exempt if received from a recognized PF after completing at least 5 years of continuous service. However, if the employee has not completed 5 years of service, PF is taxable as salary income in the year of receipt. The exemption limit for Gratuity is calculated as the least of the following: 15 days' salary for each completed year of service or part thereof; actual amount received; or Rs 20 lakh. The salary for this purpose includes basic pay and dearness allowance.