Gratuity Calculator

Determine the lump sum amount you are entitled to receive upon resignation or retirement. Accurate calculation as per Payment of Gratuity Act, 1972.

Gratuity is a statutory benefit provided by an employer to an employee for their dedicated service. It serves as a financial reward given at the time of retirement, resignation, or layoff.

In India, the Payment of Gratuity Act, 1972 mandates that all establishments with 10 or more employees must pay gratuity to eligible staff members. Our Gratuity Calculator helps you verify if you are eligible and exactly how much you can expect to receive.

Why use a Gratuity Calculator?

The calculation involves a specific factor (15/26) which many employees are unaware of. This tool helps you:

  • Verify Payouts: Ensure your company is paying you the correct amount upon exit.
  • Plan Finances: If you are planning to switch jobs after 4.5 years, this calculator shows you the financial loss of leaving before completing 5 years.
  • Check Tax Liability: Determine how much of your gratuity will be tax-free.

Eligibility Checklist

You are eligible to receive gratuity if:

  1. You are an employee of an organization covered under the Act.
  2. You have completed 5 continuous years of service with the same employer.
  3. You are resigning, retiring, or have been laid off (termination for misconduct may disqualify you).

Gratuity Calculation Formula

For employees covered under the Act, the formula is:

G = (Salary × 15 × N) / 26

Where:

  • G = Total Gratuity Amount.
  • Salary = Last drawn Basic Salary + Dearness Allowance (DA). Allowances like HRA, Conveyance are NOT included.
  • 15 = Wages for 15 days per year.
  • N = Number of completed years of service. (Job duration of 6+ months in the last year is rounded up to 1 full year).
  • 26 = Number of working days in a month.

Calculate Your Gratuity

₹ 50,000
₹

Enter current Basic Salary plus Dearness Allowance

5 yrs

Minimum 5 years required for eligibility

Total Gratuity Payable

₹ 0

Tax Exempt (Max 20L)

₹ 0

Taxable Gratuity

₹ 0

Formula used: (Basic + DA) × 15/26 × Years of Service

  • 15 days wages for every completed year
  • Month is reckoned as 26 days
  • Tax exemption limit is ₹20 Lakhs

Example Calculation

Scenario: Mr. Mehta has worked for 14 years and 7 months. His last drawn Basic + DA is ₹40,000.

  • Years (N): 15 (Since 7 months > 6 months, it is rounded up).
  • Salary: ₹40,000

Calculation:

G = (40,000 × 15 × 15) / 26 = ₹3,46,153

Mr. Mehta will receive approximately ₹3.46 Lakhs as gratuity.

Tax Exemption Rules (FY 2024-25)

Gratuity tax exemption limits were increased in 2019.

  • Govt Employees: 100% Tax Free.
  • Private Employees: The lowest of the following 3 is tax-free:
    1. Actual Gratuity Received.
    2. ₹20 Lakhs (Maximum statutory limit).
    3. Calculated amount [ (15/26) × Salary × Years worked ].

Note: If you receive gratuity from multiple employers during your lifetime, the total tax-free exemption cannot exceed ₹20 Lakhs.

Frequently Asked Questions (FAQs)

What is the minimum service for Gratuity eligibility?

You must complete at least 5 years of continuous service with the same employer to be eligible for gratuity. This condition is waived in case of death or disablement.

How is the 5-year period calculated?

If you have worked for 4 years and 240 days (for organizations with a 6-day work week) or 4 years and 190 days (for 5-day work week), it is generally considered as 5 years of continuous service by judicial interpretation, but strict adherence varies. It's safe to complete 5 full years.

Is Gratuity tax-free?

For government employees, it is fully tax-free. For private sector employees covered under the Gratuity Act, the least of the following is tax-free: 1) ₹20 Lakhs, 2) Actual gratuity received, 3) 15 days salary × years of service. Any excess is taxable.

Does my CTC include Gratuity?

Yes, most employers include the gratuity component in the Cost to Company (CTC) structure. However, it is paid out only when you leave the organization after 5 years.

Is Gratuity paid during notice period?

Yes, the notice period counts as service. Your last working day serves as the end date for calculation.

Disclaimer: This calculator applies to employees covered under the Payment of Gratuity Act, 1972. For those not covered, the formula calculates on 15/30 basis. Please verify your eligibility with your HR department.