Gratuity Calculator
Calculate your gratuity amount based on years of service and last drawn salary
About Gratuity Calculation
Gratuity is a lump sum amount paid by employers to employees as a token of appreciation for their service. It's calculated based on your last drawn basic salary plus dearness allowance and total years of service.
Eligibility Criteria:
- Minimum 5 years of continuous service
- Applicable to organizations with 10+ employees
- Coverage under Payment of Gratuity Act, 1972
Formula Used:
Gratuity = (Basic Salary + DA) × 15/26 × Years of Service
Note: Maximum gratuity limit is ₹10 lakhs
Frequently Asked Questions
What is gratuity and who is eligible for it?
Gratuity is a lump sum amount paid by employers to employees as a token of appreciation for their service. Any employee who has completed at least 5 years of continuous service in an organization with 10 or more employees is eligible for gratuity under the Payment of Gratuity Act, 1972.
How is gratuity calculated?
Gratuity is calculated using the formula: Gratuity = (Basic Salary + Dearness Allowance) × 15/26 × Years of Service. The factor 15/26 represents 15 days out of 26 working days in a month. For example, if your basic salary plus DA is ₹30,000 and you've worked for 5 years, your gratuity would be ₹86,538.
What is the maximum gratuity amount?
Under the Payment of Gratuity Act, 1972, the maximum gratuity amount is capped at ₹10 lakhs. Any amount paid beyond this limit is considered as ex-gratia payment and is not mandatory under the Act.
Can I receive gratuity before completing 5 years?
Yes, you can receive gratuity before completing 5 years if you become disabled due to an accident or disease. In such cases, the 5-year minimum service requirement is waived, and you become eligible for gratuity payment.
How are partial years of service calculated?
If you have worked for more than 6 months in a year, it is rounded up to a full year. For example, if you've worked for 5 years and 7 months, it will be considered as 6 years for gratuity calculation purposes.
Is gratuity taxable?
Gratuity received by government employees is fully exempt from tax. For private sector employees, gratuity is exempt up to the least of: (i) Actual gratuity received, (ii) ₹20 lakhs (enhanced limit), or (iii) 15 days' salary for each completed year of service.
When is gratuity paid?
Gratuity is typically paid at the time of retirement, resignation, or termination of employment. It must be paid within 30 days from the date it becomes payable. If delayed, the employer is liable to pay simple interest on the amount.
What components are included in salary for gratuity calculation?
For gratuity calculation, only basic salary and dearness allowance (DA) are considered. Other components like house rent allowance (HRA), conveyance allowance, special allowance, and bonuses are not included in the calculation.