Gratuity Calculator
Calculate gratuity amount based on service years and salary
Gratuity Details
Exclude HRA, bonus, overtime, other allowances
More than 6 months counts as 1 extra year
Method: Covered by Gratuity Act: (Last drawn Basic+DA) × (15/26) × eligible years
Eligibility
Eligible
Years Counted
7
Statutory Payable
₹2,01,923
Ex-gratia Portion
₹0
Gratuity vs Years
Gratuity Breakdown
Statutory Payable
₹2,01,923Ex-gratia Portion
₹0What is Gratuity?
Gratuity is a lump-sum monetary benefit paid by an employer to an employee as a reward for long-term service. It is payable on retirement, resignation, superannuation, or in case of death or disability. The Payment of Gratuity Act, 1972 governs gratuity for covered establishments.
Gratuity Eligibility Criteria in India
Employees become eligible for gratuity under these conditions:
- On Superannuation: Eligible upon reaching the company’s retirement age.
- On Retirement or Resignation: Minimum 5 years of continuous service (or 4 years and 8 months).
- In Case of Disability: Eligible immediately; minimum service not required.
- In Case of Death: Gratuity is paid to the nominee irrespective of service duration.
Note: Standard minimum service for gratuity = 4 years 8 months in most cases.
Formula to Calculate Gratuity
Gratuity = 15/26 × Last Drawn Salary × Completed Years of Service
- Last Drawn Salary = Basic + DA
- 15 = 15 days wages per year
- 26 = Working days in a month
- Completed Years: 6+ months rounded up; less than 6 months rounded down
Example
Last Drawn Salary = ₹50,000
Service = 9 years 7 months → counts as 10 years
Gratuity = 15/26 × 50,000 × 10
= ₹2,88,462 (approx.)Benefits of Gratuity
- Financial Security Post-Employment: Helps employees after retirement or resignation.
- Encourages Employee Retention: Promotes long-term service.
- Retirement Corpus: Supports pension and PF savings.
- Tax Benefits: Partially or fully tax-free based on employee type.
Income Tax on Gratuity in India
Taxability depends on whether the employee is in the government or private sector:
- Government Employees: Full tax exemption on gratuity received.
- Private Sector Employees: Least of the following is tax-free:
- Amount calculated under the Act
- Actual gratuity received
- ₹20 lakh maximum tax-free limit
How is Gratuity Calculated Using a Calculator?
- Last drawn monthly Basic + DA
- Years of service (auto rounding applied)
- Act-covered or not covered
The calculator displays:
- Estimated gratuity amount
- Tax-free portion (up to ₹20 lakh)
- Rounding and eligibility details
How to Use Finanjo’s Gratuity Calculator
- Enter Last Drawn Salary (Basic + DA)
- Enter Total Service Years & Months
- Select Act-Covered or Not Covered
- (Optional) Select Government Employee for tax benefit calculation
- View instant results: Gratuity & Tax-Exempt Portion
Frequently Asked Questions about Gratuity
Is gratuity mandatory?
Yes, it is mandatory for establishments with 10 or more employees under the Payment of Gratuity Act, 1972.
What if I resign before 5 years?
You are generally not eligible unless resignation is due to death or permanent disability.
Does a break in service affect eligibility?
Yes. Continuous service is required. Permissible breaks depend on employer policy and Act provisions.
What is the minimum service period for gratuity?
Minimum 5 years of continuous service (or 4 years and 240 days). For death or disability, no minimum period is required.
How much gratuity can I get tax-free?
Government employees get full exemption. Private employees get exemption up to ₹20 lakh.
Is gratuity paid on gross salary or basic salary?
Gratuity is calculated only on Basic Salary + Dearness Allowance (DA).
Is gratuity applicable to contractual employees?
Yes, if they are considered employees of the establishment and complete the required service period.
What happens if the employer does not pay gratuity?
You can file a complaint with the Controlling Authority under Section 7 of the Act. Penalties may apply to the employer.
Is gratuity available if the company closes down?
Yes. Employees are still eligible if they completed the required service period.
Can an employer refuse to pay gratuity?
No. Refusal is illegal unless the employee was dismissed for misconduct that caused financial loss to the company.
