Estimate your statutory gratuity payout under the Payment of Gratuity Act, 1972. Compare act coverage definitions, check continuous service eligibility, and evaluate tax-free limits instantly.
Loading explanation of continuous service rounding rules and divisor parameters...
| Particulars | Calculation Value | Rule Description |
|---|---|---|
| Last Drawn monthly salary | ₹0 | Basic salary plus Dearness Allowance (DA) only. |
| Total service period | 0 Years, 0 Months | The total years and months worked with the employer. |
| Eligible service years | 0 Years | Service duration adjusted based on act rounding rules. |
| Gratuity Act status | Covered | Statutory coverage determines the calculation divisor and rounding rules. |
| Maximum tax exemption limit | ₹20,00,000 | Maximum tax-free gratuity allowed under Section 10(10) of the Income Tax Act. |
| Total Gratuity Payable | ₹0 | The computed lump-sum gratuity payable at departure. |
| Tax Exempt Gratuity | ₹0 | The portion exempt from tax under Section 10(10). |
| Taxable Gratuity Portion | ₹0 | The portion added to taxable income under salaries. |
Gratuity is a defined retirement benefit plan under which an employer pays a one-time lump-sum cash benefit to an employee as a token of gratitude for their long-term, continuous services. It is governed by the Payment of Gratuity Act, 1972, and applies to factories, mines, oilfields, plantations, ports, railway companies, shops, and other establishments where 10 or more people are employed.
To receive gratuity, an employee must meet the following statutory requirements:
Calculation formulas differ based on whether the employer is legally covered under the Payment of Gratuity Act:
For employees whose organizations employ 10 or more staff members and are covered under the Act:
For employees of smaller organizations or entities that pay gratuity voluntarily:
Under Section 10(10) of the Income Tax Act, tax exemptions are applied as follows:
Suppose you are a private-sector employee covered under the Gratuity Act, and you resign with the following details:
Step-by-Step Calculation:
Ask our custom AI assistant regarding Gratuity eligibility rules, Section 10(10) tax exemptions, death benefits, or employer coverage conditions.
Topics this feature will cover:
Be first to access it when it launches.
We'll notify you the moment AI Advisor goes live. One email, no spam.
You're on the list!
Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their long-term association with the organization. It is a defined benefit plan governed by the Payment of Gratuity Act, 1972 in India.
An employee is eligible for gratuity if they have rendered continuous service for at least 5 years with the same employer. This applies to all permanent employees in companies with 10 or more staff members.
Generally, yes. However, the 5-year requirement is waived in case of the employee's death or disablement due to an accident or disease during service. In such unfortunate cases, gratuity is paid to the employee or their nominee/nominees regardless of the duration of service.
Organizations with 10 or more employees are legally covered under the Payment of Gratuity Act, 1972, and must follow standard statutory rules (such as 15/26 days' salary and rounding up partial years exceeding 6 months). Non-covered organizations are smaller or choose to pay gratuity voluntarily, using a 15/30 days' salary formula and only completed years of service.
The formula is: Gratuity = (Last Drawn Salary * 15 * Completed Years of Service) / 26. In this formula, the salary is calculated for 15 days out of 26 working days in a month, and service duration of 6 months or more is rounded up to the next full year.
The formula is: Gratuity = (Average Salary of last 10 months * 15 * Completed Years of Service) / 30. Here, the salary is calculated for 15 days out of 30 calendar days in a month, and only completed years of service are considered (months are ignored).
For gratuity purposes, 'Salary' is defined as Basic Salary plus Dearness Allowance (DA). Any other allowances, bonuses, HRA, or commissions are excluded from this calculation.
Gratuity received by government employees is fully exempt from income tax. For private-sector employees, gratuity is tax-exempt up to the least of: (a) actual gratuity received, (b) statutory limit of ₹20 Lakhs, or (c) gratuity calculated as per the act formula.
The maximum tax-exempt limit for gratuity under Section 10(10) of the Income Tax Act for non-government employees is ₹20,00,000 (₹20 Lakhs). Any amount received above this limit is taxable as salary.
Yes, an employer can pay more than the statutory formula or limit as a performance bonus or additional benefit. However, the amount exceeding the ₹20 Lakhs statutory limit will be subject to tax as per the employee's tax bracket.
Read our in-depth articles and guides related to this tool to help you make smarter decisions.
Most Indians accept an EMI figure from their bank without questioning it. This guide explains exactly how Indian banks calculate EMI — the reducing balance method, how RBI repo rate changes flow through to your loan, and what you can do to pay off your home loan years early.
Finance
Understand the math behind monthly mortgage payments. Learn how to calculate Principal and Interest (P&I) manually, evaluate the costs of PMI, estimate escrow expenses, and discover strategies to save over $200,000 in lifetime interest.
Compound interest is the single most powerful force in personal finance. Understand the formula, see how small differences in rate and time create massive differences in outcome, and learn how to use it to your advantage.
Convert any baseline salary metric instantly across multiple frequencies. Factor in working times, holidays, and unpaid vacations to reveal your effective time value with intelligent AI diagnostics.
Determine the exact retirement corpus you need, project your compounding savings, and map out post-retirement income security.
Calculate your National Pension System (NPS) maturity corpus, tax savings, and estimated monthly pension under the Indian NPS retirement scheme.
Calculate and compare your tax liability under the Old and New Tax Regimes for India FY 2025-26 (AY 2026-27). Plan deductions, calculate HRA exemptions, and see marginal relief.
See how systematic small savings grow into monumental long-term fortunes. Compute compound schedules instantly with zero registration required.
Calculate your House Rent Allowance (HRA) tax exemption and taxable HRA for FY 2025-26 (AY 2026-27) under Section 10(13A).
Estimate mortgages, personal credit, or car finance costs. Sync simple numeric sliders with your screen, designed with large mobile thumb friendly mechanics.
Settle your loan targets transparently. Map Home, Car, or Personal Loan schedules. Switch timelines between Years & Months, and build optimized payoff pipelines with smart AI insights.
See how systematic small savings grow into monumental long-term fortunes. Compute compound schedules instantly with zero registration required.
Convert any baseline salary metric instantly across multiple frequencies. Factor in working times, holidays, and unpaid vacations to reveal your effective time value with intelligent AI diagnostics.
Unleash the mathematical force of compounding. Model initial capital, recurring contributions, variable compound intervals, and analyze exponential progress instantly.
Easily add or subtract GST taxes with customizable percentages. Designed with large touch interfaces optimized specifically for mobile-first tax management.
Estimate your tax liability under old and new regimes, plan your retirement corpus using the NPS framework, or calculate compounding growth on investments.
