About the Gratuity Calculator

Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for the services they have provided. In India, it is a mandatory benefit governed by the Payment of Gratuity Act, 1972. This calculator helps you determine the amount you are eligible to receive after leaving a job.

The Gratuity Calculation Formula

For employees covered under the Gratuity Act, the amount is calculated using a specific formula:

• Last Drawn Salary: This includes your Basic Salary and Dearness Allowance (DA), but not other allowances like HRA.
• 26: The number of working days in a month is considered to be 26 for this calculation.
• 15: The calculation is based on 15 days of salary for every completed year of service.
• Years of Service: If you have worked for more than six months in your last year of employment, it is rounded up to the next full year. For example, 7 years and 7 months is considered 8 years.

Frequently Asked Questions (FAQ)

Who is eligible to receive gratuity?

You are eligible for gratuity if you have completed at least five years of continuous service with a single employer. This rule applies upon your retirement, resignation, or in the unfortunate event of death or disablement.

Is there a maximum limit on the gratuity amount?

Yes, under the Payment of Gratuity Act, the maximum amount of gratuity that can be paid to an employee is ₹20 lakhs. Any amount received above this limit is taxable.

Is gratuity taxable?

For government employees, gratuity is fully exempt from income tax. For private-sector employees covered by the Gratuity Act, the gratuity is tax-exempt up to the least of the following: (a) ₹20 lakhs, (b) the actual gratuity received, or (c) 15 days' salary for each completed year of service.