Gratuity Calculator

For employees covered under the Gratuity Act, the formula is: Gratuity = (Last Drawn Salary × 15 × Completed Years of Service) ÷ 26. Here, "Last Drawn Salary" includes basic salary plus dearness allowance, "15" represents 15 days of wages, and "26" is the number of working days in a month. For non-covered establishments, the divisor may be 30 instead of 26.

Under the Payment of Gratuity Act, an employee must complete a minimum of 5 years of continuous service to be eligible for gratuity on resignation. However, in cases of death or disablement, gratuity is payable irrespective of the length of service. Some employers may have more generous policies.

Completed years of service are calculated from date of joining to date of exit. If an employee has worked for more than 6 months (or a threshold set by the employer) beyond the last completed year, that period is typically rounded up to a full year. For example, 4 years 7 months rounds up to 5 years.

Gratuity received by government employees is fully exempt from tax. For private-sector employees covered under the Gratuity Act, the least of the following is exempt: (1) actual gratuity received, (2) ₹25,00,000 (current statutory limit), or (3) 15 days salary for each completed year of service. Any amount exceeding the exemption is taxable as salary income.

The maximum tax-exempt gratuity for private-sector employees is ₹25,00,000 as per the latest notification. This limit was raised from ₹20,00,000. Any gratuity received in excess of this limit is included in taxable income.

Establishments with 10 or more employees are "covered" under the Payment of Gratuity Act and must use 26 working days as the divisor. Non-covered establishments (with fewer than 10 employees) may use 30 calendar days. The covered formula typically results in a higher gratuity amount.

An employer can forfeit gratuity partially or wholly if the employee is terminated for misconduct involving riotous or violent behaviour, or if an offence involving moral turpitude is committed during employment. Outside these specific reasons, gratuity cannot be legally withheld.

Contract employees who have completed 5 or more years of continuous service with the same employer are generally eligible for gratuity under the Act. However, eligibility may vary based on the nature of the contract and employer classification.

No. The gratuity estimates are illustrative and based on the standard formula. Actual gratuity payable depends on employer policy, applicable law, your salary structure, and employment history. Always verify with your HR department or a financial advisor.