Gratuity Calculator
Calculate gratuity amount based on last salary and years of service. Includes tax-free limits and yearly accumulation analysis.
About This Calculator
Gratuity is a monetary benefit paid by employers to employees as a token of appreciation for their services. It's payable upon retirement, resignation, death, or disablement after completing a minimum of 5 years of continuous service.
Our calculator helps you determine the exact gratuity amount based on your last drawn salary and years of service, considering different organization types and tax implications.
Gratuity Calculation Formula:
For organizations covered under Gratuity Act:
Gratuity = (Last Salary × 15 × Years of Service) ÷ 26
For organizations not covered under Gratuity Act:
Gratuity = (Last Salary × 15 × Years of Service) ÷ 30
Eligibility Criteria:
- Service Period: Minimum 5 years of continuous service
- Organization Size: 10 or more employees (for Gratuity Act coverage)
- Salary Basis: Last drawn basic salary + dearness allowance
- Maximum Limit: ₹20 lakh (as per current rules)
When is Gratuity Payable:
- Retirement: Upon reaching retirement age
- Resignation: After completing 5 years of service
- Death: To nominee/legal heir (no minimum service period)
- Disablement: Due to accident or disease
Tax Implications:
- Tax-Free Limit: Up to ₹20 lakh is completely tax-free
- Excess Amount: Amount above ₹20 lakh is taxable
- Section 10(10): Provides tax exemption for gratuity
- Form 16: Employer provides tax details
Important Notes:
- Gratuity is calculated on basic salary, not gross salary
- Fractional years above 6 months are rounded up
- Different formulas for covered vs non-covered organizations
- Nomination facility is available
- Employer must pay within 30 days
Features:
- Calculate gratuity for different organization types
- Tax-free vs taxable amount breakdown
- Yearly gratuity accumulation tracking
- Visual gratuity growth over service years
- Comprehensive gratuity rules and guidelines
Frequently Asked Questions
What is gratuity?
Gratuity is a monetary benefit paid by employers to employees as a token of appreciation for their services. It's a statutory benefit under the Payment of Gratuity Act, 1972. Gratuity is payable upon retirement, resignation (after 5 years), death, or disablement. The maximum gratuity amount is capped at ₹20 lakh, which is completely tax-free.
Who is eligible for gratuity?
Employees are eligible for gratuity after completing 5 years of continuous service with the same employer. However, the 5-year rule doesn't apply in cases of death or disablement. The employer must have 10 or more employees to be covered under the Gratuity Act. Both government and private sector employees are eligible.
How is gratuity calculated?
For organizations covered under the Gratuity Act: Gratuity = (Last Salary × 15 × Years of Service) ÷ 26. For organizations not covered: Gratuity = (Last Salary × 15 × Years of Service) ÷ 30. Last salary includes basic pay plus dearness allowance. Years of service are rounded - 6+ months count as a full year.
Is gratuity taxable?
Gratuity up to ₹20 lakh is completely tax-free for private sector employees under Section 10(10) of the Income Tax Act. Any amount above ₹20 lakh is taxable as per your income slab. For government employees, the entire gratuity amount is tax-free without any limit.
What is the maximum gratuity amount?
The maximum gratuity amount payable under the Payment of Gratuity Act is ₹20 lakh. This limit was increased from ₹10 lakh in 2018. Even if the calculated gratuity exceeds ₹20 lakh, only ₹20 lakh is paid, and this entire amount is tax-free for private sector employees.
When is gratuity payable?
Gratuity is payable in the following situations: 1) Retirement or superannuation, 2) Resignation after completing 5 years of service, 3) Death (to nominee/legal heir, no minimum service required), 4) Disablement due to accident or disease, and 5) Termination (in some cases). Employer must pay gratuity within 30 days of it becoming payable.
Can an employer refuse to pay gratuity?
An employer cannot refuse gratuity if the employee has completed 5 years of service and is otherwise eligible. If gratuity is not paid, the employee can file a claim with the Controlling Authority under the Payment of Gratuity Act. Delayed payment also attracts interest at the rate notified by the government.
What happens to gratuity if I change jobs?
Gratuity is not transferable between employers. If you change jobs before completing 5 years, you lose the gratuity accumulated with the previous employer. There's no provision for transferring gratuity like EPF. This is why completing 5 years with one employer is important to become eligible for this benefit.
Does contract employee get gratuity?
Contract employees are generally not eligible for gratuity from the company where they work on contract, as they are not direct employees. However, if they are on the rolls of a contracting company, that company may pay gratuity. Consultants and freelancers are typically not covered under the Gratuity Act.
How to claim gratuity after resignation?
To claim gratuity after resignation: 1) Ensure you've completed 5+ years, 2) Submit Form I (application for gratuity) to your employer within 30 days, 3) Provide bank details for transfer, 4) Employer must pay within 30 days of application or last working day, 5) If delayed, approach the Controlling Authority. Keep copies of all correspondence.