Gratuity Calculator

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.