Gratuity Calculator
Calculate your gratuity amount based on last drawn salary and years of service under the Payment of Gratuity Act.
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What is a Gratuity Calculator?
A Gratuity Calculator helps you estimate the gratuity amount you are entitled to receive from your employer upon retirement, resignation, or completion of a specified period of service. Gratuity is a lump sum benefit paid as a token of gratitude for the employee's service.
Gratuity Calculation Formula
Gratuity = (15 × Last Drawn Salary × Years of Service) / 26
Where:
- 15 = 15 days' wages for each completed year of service
- Last Drawn Salary = Basic salary + Dearness Allowance (DA)
- Years of Service = Completed years (rounded to nearest year if > 6 months)
- 26 = Working days in a month
Gratuity Eligibility
- Minimum Service: Employee must complete at least 5 years of continuous service
- Exception: In case of death or disability, the 5-year rule does not apply
- Tax Exemption: Gratuity up to ₹20 lakh is tax-exempt for employees covered under the Act
- Applicable to: Establishments with 10 or more employees
Gratuity Calculation Example
If your last drawn basic salary + DA is ₹50,000 per month and you have completed 10 years of service:
- Gratuity: (15 × ₹50,000 × 10) / 26 = ₹2,88,462
This amount is tax-free as it is below the ₹20 lakh exemption limit. If your service period is 10 years and 7 months, it is rounded to 11 years for calculation purposes.
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Frequently Asked Questions
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Any employee who has completed at least 5 years of continuous service in an organization with 10 or more employees is eligible for gratuity. The 5-year condition is waived in case of death or permanent disability.
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For employees covered under the Payment of Gratuity Act, gratuity up to Rs 20 lakh is exempt from income tax. Any amount exceeding Rs 20 lakh is taxable. For government employees, the entire gratuity is tax-exempt.
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Last drawn salary for gratuity calculation includes basic salary and dearness allowance (DA). It does not include HRA, overtime, bonus, commission, or any other allowances.
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Generally, no. However, if an employee dies or becomes disabled during the service period, gratuity is payable regardless of the years of service. Some organizations may also pay gratuity voluntarily.
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If you have worked for more than 6 months in the last year of service, it is rounded up to the next full year. For example, 7 years and 8 months is counted as 8 years, while 7 years and 4 months is counted as 7 years.
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