Gratuity Calculator
Calculate your gratuity amount and understand tax implications
₹
Yr
Formula Used
Gratuity = (15 x Salary x Years) / 26
15 = days of wages; 26 = working days per month
Eligible for Gratuity
You have completed 10 years of service and qualify for gratuity.
Gratuity Amount
₹2.88 L
Monthly salary (Basic + DA)₹50,000
Years of service10 years
Tax exemption limit₹20.00 L
Taxable gratuity₹0
Gratuity payable₹2.88 L
Understanding Gratuity
Gratuity is a lump-sum benefit paid by an employer to an employee as a token of appreciation for their service. Under the Payment of Gratuity Act, 1972, it is mandatory for establishments with 10 or more employees. The amount depends on your last drawn salary (Basic + DA) and years of service. It is a significant component of your retirement corpus and is partially tax-exempt.
Frequently Asked Questions
Who is eligible for gratuity in India?▾
An employee is eligible for gratuity if they have completed at least 5 years of continuous service with the same employer. This applies to all establishments with 10 or more employees. In case of death or disability, the 5-year minimum is waived. The Payment of Gratuity Act, 1972 governs these rules. Importantly, the 5-year period is calculated from the date of joining to the date of resignation/retirement.
How is gratuity calculated?▾
For employees covered under the Payment of Gratuity Act, the formula is: Gratuity = (15 x Last Drawn Salary x Years of Service) / 26. Here, 'Last Drawn Salary' means Basic Salary + Dearness Allowance (DA). The number 15 represents 15 days' wages, and 26 represents the working days in a month. For employees not covered under the Act (e.g., those in firms with fewer than 10 employees), the formula uses 30 instead of 26.
Is gratuity taxable?▾
Gratuity received by government employees is fully exempt from tax. For private sector employees covered under the Gratuity Act, the tax exemption is the least of: (1) Actual gratuity received, (2) Rs 20 lakh (the maximum limit as per the 2024 amendment), or (3) 15 days' salary for each completed year of service. Any amount exceeding this exemption is taxed as income from salary.
What happens to gratuity if I resign before 5 years?▾
If you resign before completing 5 years of continuous service, you are generally not entitled to gratuity under the Payment of Gratuity Act. However, some companies voluntarily pay gratuity even for shorter tenures as part of their HR policy. The 5-year rule has one exception: if 4 years and 240 days have been completed, courts have sometimes treated it as 5 years for gratuity eligibility.
Explore More Tools
Discover more ways to research and analyze Indian stocks
Stock RankingsAI-ranked stocks from earnings callsStock ScreenerFilter by P/E, ROE, growth & moreIPO DashboardUpcoming, open & listed IPOsCompare StocksSide-by-side stock comparisonEarnings CalendarUpcoming earnings callsAnalyze PortfolioAI health check for your portfolioBlogMarket insights & guides