Gratuity Calculator
Calculate gratuity amount based on years of service and last drawn salary
Gratuity is a retirement benefit paid by the employer to an employee for rendering services continuously for 5 years or more. It's governed by the Payment of Gratuity Act, 1972, and is calculated based on:
- Last drawn salary (basic pay + dearness allowance)
- Years of service completed (including fractions)
- Type of employment (government, public sector, or private sector)
Gratuity Calculation Results
Total Gratuity Amount
Based on your service period and salary
| Last Drawn Salary | ₹ 0 |
|---|---|
| Total Service Period | 0 years, 0 months, 0 days |
| Service Period Considered | 0 years |
| Tax Exemption Limit | ₹ 0 |
| Taxable Gratuity Amount | ₹ 0 |
Tax Analysis
Gratuity Tax Calculation
| Income Component | Amount | Taxable Amount | Tax Rate | Tax Amount |
|---|---|---|---|---|
| Other Income | ₹ 0 | ₹ 0 | 0% | ₹ 0 |
| Gratuity | ₹ 0 | ₹ 0 | 0% | ₹ 0 |
| Total Tax on Gratuity | - | - | - | ₹ 0 |
Important Notes:
- Gratuity is tax-free up to ₹20 lakhs or actual gratuity received, whichever is less.
- For employees covered under the Payment of Gratuity Act, gratuity is calculated as: Last drawn salary × 15/26 × completed years of service.
- For employees not covered under the Act (e.g., government employees), gratuity is typically calculated as: Last drawn salary × 15 days × completed years of service / 30 days.
- Gratuity is payable only if the employee has completed at least 5 years of service (except in case of death or disability).
- The tax calculation is an estimation and may vary based on other income and deductions available to the individual.
Gratuity Guide & Tutorial
Understanding Gratuity
Gratuity is a monetary benefit given by employers to employees for their service to the organization. It's a mandatory benefit under the Payment of Gratuity Act, 1972, for organizations with 10 or more employees.
Eligibility Criteria
- Minimum 5 years of continuous service
- Applicable on retirement/resignation
- No minimum service in case of death/disability
- Covers all employees (workers, supervisors, managers)
Key Benefits
- Tax-free up to ₹20 lakhs
- Retirement financial security
- Legal protection under the Act
- Mandatory benefit in eligible organizations
Gratuity Calculation Methods
Under Payment of Gratuity Act
Formula: (Last drawn salary × 15/26 × Completed years)
- Applicable to covered establishments
- 15 days salary for each completed year
- 26 working days per month
- Maximum gratuity: ₹20 lakhs
Government/PSU Employees
Formula: (Last drawn salary × 15 × Completed years)/30
- Different rules for government employees
- Based on last month's salary
- 30 days per month consideration
- Special provisions may apply
Service Period Calculation
| Scenario | Treatment | Example |
|---|---|---|
| Complete Year | Counted as 1 year | 5 years = 5 years |
| 6 months or more | Rounded to next year | 5 years 7 months = 6 years |
| Less than 6 months | Ignored | 5 years 4 months = 5 years |
| Leave Period | Included if authorized | Maternity leave counted as service |
Tax Implications on Gratuity
Exemption Rules
- Maximum Limit: ₹20 lakhs under Section 10(10)
- Government Employees: Fully exempt
- Non-Government: Least of the following:
- Actual gratuity received
- ₹20 lakhs
- 15 days' salary × years of service
Taxable Amount Calculation
- Step 1: Calculate total gratuity
- Step 2: Determine exempt amount
- Step 3: Excess is taxable as salary
- Step 4: Add to other income and apply tax slab
Frequently Asked Questions
Yes, gratuity is payable on resignation if:
- Employee has completed 5 years of continuous service
- Service period includes authorized leaves
- Resignation is properly submitted and accepted
The calculation method remains the same as for retirement.
Continuous service includes:
- Actual days of work
- Authorized leaves with full wages
- Maternity leave (maximum 12 weeks)
- Lay-off period under agreement
Service is considered continuous if employee has worked for at least 240 days in a year.
If gratuity payment is delayed:
- Employer must pay simple interest at 10% p.a.
- Interest calculated from due date till actual payment
- Employee can file complaint with controlling authority
- Penalty may be imposed on employer
Gratuity should be paid within 30 days from the date it becomes payable.
Gratuity can be forfeited wholly or partially if:
- Services terminated due to:
- Riotous or disorderly conduct
- Act involving moral turpitude
- Willful omission or negligence causing damage
- Violation of employment terms
Forfeiture must be supported by proper documentation and evidence.
For part-time employees:
- Based on actual salary drawn
- Must meet 240 days criteria per year
- Proportionate calculation based on working hours
- Same formula but with adjusted salary
Special considerations:
- Regular part-time work counts as continuous service
- Salary proportionate to full-time employees
- Written agreement should specify terms