Gratuity Calculator
Calculate Your Gratuity Benefits Accurately
Use this calculator to determine your gratuity amount based on your salary and years of service. Gratuity is a financial benefit given by an employer to an employee for the services rendered to the organization for a specified period of time (usually 5 years or more).
Gratuity Input Details
Enter your salary and employment details
Since months are less than 6, we'll use completed years only.
Gratuity Calculation Results
Based on your 5 years and 0 months of service
Basic Salary + DA
₹30,000
Effective Years
5
Total Gratuity Amount
₹0
Gratuity Calculation Examples
Real-world examples showing how gratuity is calculated for different scenarios
IT Professional - Act Covered
Bank Employee - Act Covered
Senior Manager - Maximum Cap
Small Company Employee
Manufacturing Worker
Startup Employee
What is Gratuity?
Gratuity is a defined benefit plan and a form of monetary benefit that an employer pays to their employee for the services rendered to the organization. According to the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity if they have completed at least 5 years of service with an organization.
The Payment of Gratuity Act, 1972 applies to establishments employing 10 or more persons. In organizations not covered by the Act, gratuity is calculated according to the half-month salary for each completed year of service.
Gratuity Eligibility Criteria
Establishments Covered Under the Gratuity Act
- Employee must have completed at least 5 years of continuous service
- Applicable for retirement, resignation, termination due to disablement, or death
- In case of death, the 5-year condition is waived, and gratuity is paid to the nominee
Establishments Not Covered Under the Gratuity Act
For organizations not covered under the Act, gratuity payment depends on the company‘s policies and the terms mentioned in the employment contract.
How is Gratuity Calculated?
For Establishments Covered Under the Gratuity Act
The formula is:
Gratuity Amount = (15 × Last drawn basic salary and dearness allowance × Completed years of service) ÷ 26
For Establishments Not Covered Under the Gratuity Act
The formula is:
Gratuity Amount = (15 × Last drawn basic salary × Completed years of service) ÷ 30
Important Considerations
- The maximum gratuity amount payable under the Act is ₹20 lakhs
- Any excess amount is considered as ex-gratia payment
- If service exceeds 6 months in the final year, it is rounded to the nearest year
- For example, 5 years and 7 months is considered as 6 years
Tax Implications on Gratuity
Gratuity received by an employee is exempt from income tax under certain conditions:
For Government Employees
The entire gratuity amount received is exempt from tax.
For Employees Covered Under the Gratuity Act
The least of the following is exempt from tax:
- Actual gratuity received
- ₹20,00,000
- 15 days‘ salary based on the last drawn salary for each completed year of service
For Other Employees
The least of the following is exempt from tax:
- Actual gratuity received
- ₹20,00,000
- Half month‘s salary for each completed year of service
Frequently Asked Questions
Gratuity vs Other Retirement Benefits
Gratuity Benefits
- • Lump sum payment on leaving employment
- • Based on last drawn salary and service years
- • Partially tax exempt up to certain limits
- • Minimum 5 years service required (except death/disability)
- • Maximum cap of ₹20 lakhs under the Act
- • Immediate payment upon eligibility
Other Benefits Comparison
- • PF: Monthly contributions, withdrawn on retirement
- • Pension: Monthly payments post-retirement
- • Leave Encashment: Payment for unused leave days
- • Bonus: Annual performance-based payment
- • VRS: Voluntary retirement scheme benefits
- • Insurance: Group life/medical coverage
Important Legal Provisions
Payment of Gratuity Act, 1972
- • Applies to establishments with 10 or more employees
- • Covers factories, mines, oilfields, plantations, ports, railways, shops, and establishments
- • Provides statutory right to gratuity for eligible employees
- • Defines calculation formula and maximum payment limits
Recent Amendments
- • Maximum gratuity amount increased from ₹10 lakhs to ₹20 lakhs (2018)
- • Enhanced coverage to include more types of establishments
- • Stricter provisions for timely payment of gratuity
- • Penalty for delayed payments increased
Employee Rights
- • Right to receive gratuity within 30 days of eligibility
- • Right to nominate beneficiary for gratuity payment
- • Right to appeal against forfeiture of gratuity
- • Right to interest on delayed payments