Gratuity Calculator India

How Gratuity Calculation Works

Gratuity is a lump sum benefit paid by employers to employees as a token of appreciation for their service. In India, it is governed by the Payment of Gratuity Act, 1972, which applies to establishments with 10 or more employees. The amount depends on the employee's last drawn salary and years of service.

Gratuity Formula

Tax Exemption on Gratuity

For government employees, gratuity is fully exempt from income tax. For private sector employees, the exemption is limited to ₹20 lakhs. The actual exempt amount is the least of: (1) actual gratuity received, (2) ₹20 lakhs, or (3) 15 days salary for each completed year of service. Any excess is taxable at your applicable slab rate.

Key Points

• 5 years minimum continuous service required (4 years 240 days counts as 5 years in some cases)
• Maximum gratuity amount under the Act is ₹20 lakhs
• Employers can pay more than the statutory limit voluntarily
• Gratuity is payable on retirement, resignation, death, or disability