Gratuity Calculator

Estimate your gratuity amount based on your salary and years of service.

Gratuity Amount

₹ 0

How is Gratuity Calculated?

The gratuity amount is calculated using a specific formula mandated by the Payment of Gratuity Act, 1972. This calculator uses the same standard formula:

Gratuity = (Last Drawn Salary × Number of Years of Service × 15) / 26

  • Last Drawn Salary: This includes your basic salary and dearness allowance (DA). It does not include other components like HRA, bonuses, or overtime.
  • Number of Years of Service: This is the total number of years you have worked for the company. As per the act, if you have worked for more than six months in your final year, it is rounded up to the next full year. For example, 7 years and 7 months of service is considered 8 years.
  • 15: Represents 15 days' salary for each completed year of service.
  • 26: Represents the number of working days in a month.

Frequently Asked Questions (FAQ)

Gratuity is a lump sum payment given by an employer to an employee as a token of appreciation for their long-term service. It is a defined benefit plan and is one of the major retirement benefits offered in India.

An employee is eligible for gratuity after completing a minimum of 5 continuous years of service with the same employer. This applies to employees in case of retirement, resignation, or termination. The 5-year rule is not applicable in the case of death or disablement of the employee.

For the purpose of gratuity calculation, the number of years of service is rounded to the nearest full year. If an employee has completed more than six months in their last year of employment, it is counted as one full year. For example, if you have worked for 9 years and 7 months, your service period will be considered as 10 years. If you have worked for 9 years and 5 months, it will be considered as 9 years.

Yes, under the Payment of Gratuity Act, the maximum gratuity amount that can be paid to an employee is ₹20 lakhs. Any amount exceeding this limit is considered voluntary and may be taxable.

The tax treatment of gratuity depends on the employee's sector:
  • Government Employees: Gratuity received by central, state, or local government employees is fully exempt from income tax.
  • Private Sector Employees (covered under the Act): The least of the following three amounts is tax-exempt: 1) The actual gratuity received, 2) ₹20 lakhs, or 3) 15 days' salary for each completed year of service.
  • Other Employees: For employees not covered under the Act, the tax exemption rules are slightly different.
It's always best to consult a financial advisor for specific tax advice.