Gratuity Calculator

Last Drawn Salary (Basic + DA)

₹

Years of Service (min. 5)

Yrs

Understanding Gratuity

What is Gratuity?

Gratuity is a lump sum amount that an employer pays an employee as a token of appreciation for their services to the company. It is a defined benefit plan, and the amount is based on your salary and years of service.

Who is Eligible for Gratuity?

As per the Payment of Gratuity Act, 1972, you are eligible for gratuity if you have completed a minimum of five continuous years of service with the same employer. This calculator automatically checks this rule.

How is Gratuity Calculated?

For employees covered under the Act, the formula is straightforward:

• Formula:
  Gratuity = (Last Salary * 15 / 26) * Years of Service
• Last Salary: This includes your Basic Salary + Dearness Allowance (DA). It does not include other allowances like HRA or transport.
• 15 / 26: This represents 15 days' salary for every year. The denominator is 26, representing the number of working days in a month (30 days - 4 Sundays).
• Years of Service: For calculation purposes, if you have completed more than 6 months in your final year, it is rounded up to the next full year. This calculator uses the exact years you enter for a simpler estimation.

Is Gratuity Taxable?

For government employees, gratuity is fully exempt from tax. For private-sector employees covered by the Act, gratuity is tax-free up to a limit of ₹20 lakhs. Any amount received over this limit is taxable as per your income slab.