Gratuity Calculator
Calculate gratuity amount based on your salary and years of service.
Not Eligible
You must complete a minimum of 5 years of continuous service to be eligible for gratuity.
Formula Used
Gratuity = (15 × Last Drawn Salary × Years of Service) ÷ 26
Gratuity = (Last drawn salary × 15 × Years of service) / 26
What is Gratuity?
Gratuity is a lump-sum benefit paid by an employer to an employee as a token of appreciation for the services rendered. It is governed by the Payment of Gratuity Act, 1972 and is applicable to establishments with 10 or more employees.
The gratuity amount is calculated using the formula: (15 × Last Drawn Salary × Years of Service) ÷ 26. The last drawn salary includes basic salary and dearness allowance (DA). The number 15 represents 15 days' wages for each completed year of service, and 26 represents working days in a month.
Gratuity Eligibility
To be eligible for gratuity under the Act, an employee must meet the following conditions:
- Minimum 5 years of continuous service: The employee must have completed at least 4 years and 240 days (190 days for seasonal establishments) of continuous service.
- Applicable on: Retirement, resignation, death, or disablement.
- Exception: In case of death or disablement, the 5-year minimum service condition is waived.
- Maximum limit: The maximum gratuity payable under the Act is ₹25,00,000 (as revised in 2024). Any amount above this is taxable.
Gratuity Tax Rules
The tax treatment of gratuity depends on whether the employee is a government or private-sector employee:
- Actual gratuity received
- 15 days' salary for each completed year of service (based on last drawn salary)
- ₹25,00,000 (the current exemption limit)
- Actual gratuity received
- Half month's salary for each completed year of service (based on average salary of last 10 months)
- ₹25,00,000
Any amount exceeding the exempt limit is added to your taxable income and taxed at your applicable slab rate.
