Gratuity Calculator

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

Gratuity Details

₹ 50,000
10 Years
Minimum 5 years of service required for gratuity.

Estimated Gratuity Amount

₹ 0

Months of Salary Considered

0

Service Years Considered

0

Year-wise Growth Breakdown

Year Gratuity Earned (This Year) Accumulated Gratuity

Understanding Your Gratuity Entitlement

Our Gratuity Calculator helps you estimate the lump sum payment you are entitled to receive from your employer.

What is Gratuity?

Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for services rendered to the organization. It is typically paid when an employee leaves the company after completing a specified number of years of service, usually upon retirement, resignation, or termination.

In India, gratuity is primarily governed by the Payment of Gratuity Act, 1972.

How Gratuity is Calculated

The calculation of gratuity depends on whether the company is covered under the Payment of Gratuity Act, 1972.

Companies Covered Under the Act:

For employees covered under the Payment of Gratuity Act, 1972, the formula is:

$$Gratuity = \frac{Last \: Drawn \: Salary \times 15 \times Years \: of \: Service}{26}$$

  • Last Drawn Salary: This includes Basic Salary + Dearness Allowance (DA).
  • 15: Represents 15 days of salary.
  • 26: Represents the number of working days in a month.
  • Years of Service: If the service period is six months or more in the last year, it is rounded up to the next full year. (e.g., 10 years and 7 months is considered 11 years). A minimum of 5 continuous years of service is required.

Companies Not Covered Under the Act:

For employees whose employers are not covered under the Act, there is no specific legal mandate, but many companies still pay gratuity as per their internal policies. The common formula used is based on 15 days of salary for each completed year of service, similar to the Act but usually considering half a month's average salary for each completed year:

$$Gratuity = \frac{Last \: Drawn \: Salary \times 15 \times Years \: of \: Service}{30}$$

  • Last Drawn Salary: This typically includes Basic Salary + Dearness Allowance (DA) + Commission (if a percentage of turnover).
  • 15: Represents 15 days of salary.
  • 30: Represents the total days in a month.
  • Years of Service: Only completed years of service are considered (no rounding up for months beyond 6).

Gratuity Eligibility Criteria

To be eligible for gratuity under the Payment of Gratuity Act, 1972, an employee must have completed a minimum of five continuous years of service with the same employer. However, this 5-year condition is waived in case of death or disablement of the employee.

Gratuity is typically paid upon:

  • Superannuation (retirement)
  • Resignation
  • Death or disablement (in which case the 5-year service period is not applicable)
  • Termination of employment

Frequently Asked Questions

For government employees, gratuity is fully exempt from income tax. For private sector employees, the least of the following three amounts is exempt from tax: actual gratuity received, ₹20 Lakhs (maximum limit), or the calculated gratuity as per the Act.

Generally, you are not eligible for gratuity if you have completed less than 5 years of continuous service. The only exceptions are in cases of death or disablement of the employee, where the 5-year service condition does not apply.

As per the Payment of Gratuity Act, the 'last drawn salary' for gratuity calculation primarily includes Basic Salary and Dearness Allowance (DA). Other allowances like HRA, medical allowance, conveyance allowance, etc., are generally not included.