Gratuity Calculator India
Calculate your gratuity amount based on salary and years of service
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
Gratuity = (15 x Last Drawn Salary x Years of Service) / 26
Where Last Drawn Salary = Basic Salary + Dearness Allowance
26 = Number of working days in a month
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
Frequently Asked Questions
What is the formula for gratuity calculation?
Gratuity = (15 x Last Drawn Salary x Years of Service) / 26. Last drawn salary includes basic salary and dearness allowance. The divisor 26 represents the number of working days in a month.
What is the minimum service required for gratuity?
An employee must complete at least 5 years of continuous service with the same employer to be eligible. However, in case of death or disability, this 5-year requirement is waived.
Is gratuity taxable in India?
Gratuity up to Rs 20 lakhs is exempt from income tax for private sector employees. For government employees, the entire amount is tax-free. Any amount exceeding Rs 20 lakhs is taxable at your slab rate.