Gratuity Calculator

What Is Gratuity and Who Is Eligible?

Gratuity is a lump-sum payment made by an employer to an employee as a token of gratitude for services rendered. It is governed by the Payment of Gratuity Act, 1972 and is mandatory for organisations with 10 or more employees.

Eligibility Criteria

• Minimum 5 years of continuous service with the same employer.
• Applicable on retirement, resignation, death, or disability.
• In case of death or disability, the 5-year minimum is waived.
• Applies to all employees (permanent, contractual, or temporary) working in establishments covered under the Act.

Gratuity Formula

For employees covered under the Act: Gratuity = (Basic Salary + DA) × 15 × Years of Service ÷ 26

The divisor 26 represents the average number of working days in a month. 15 represents 15 working days per year of service.

Tax Exemption on Gratuity

• For government employees: fully exempt from income tax.
• For private sector employees covered under the Gratuity Act: exempt up to ₹20 lakh (enhanced from ₹10L in 2019).
• For private employees not covered under the Act: exempt up to ₹10 lakh or actual gratuity, whichever is lower.