Gratuity Calculator

Gratuity Calculator

Enter your final month’s salary and years of service to calculate your gratuity amount.

Gratuity Calculator

Use this gratuity calculator online to estimate the gratuity amount you are eligible to receive upon retirement, resignation, or disability. The calculation is based on your basic salary and total years of service, according to the provisions of the Gratuity Act, 1972 in India.

What is Gratuity?

Gratuity is the amount an employer pays to employees as a token of appreciation for their long-term service.

It is a form of social security benefit given to employees when they retire, resign, or terminate service after completing five years or more. Employees can receive gratuity before five years of service if they suffer disability due to accident or disease.

Gratuity is governed by labor laws under the Payment of Gratuity Act, 1972. Employees can receive gratuity even before completing five years in case of disability.

Eligibility Criteria for Gratuity Amount

To be eligible for gratuity payment, an employee generally must meet the following conditions:

Minimum of 5 years of continuous service with the same employer.
Reason for gratuity payment:
- Retirement or Superannuation
- Resignation or Voluntary Retirement
- Death or Disablement (no minimum service required)
The employer must have 10 or more employees during the preceding 12 months.

How To Calculate Gratuity?

Act-Based Gratuity Formula:

G = n × b × 15 / 26

Where:

G = Gratuity amount
n = Number of years of service
b = Last drawn basic salary + Dearness Allowance (DA)

Gratuity Calculation for Non-Act Covered Employers:

For employees whose employers are not covered under the Gratuity Act, gratuity is calculated as half a month’s salary for each completed year of service:

Gratuity = 15 × Last drawn salary × Years of service / 30

Example

An employee worked for 9 years and 4 months with a last drawn salary of $2,000 per month. Calculate the gratuity amount.

Solution

Step 1: Determine completed years of service.

Only full years are considered, so 9 years are taken.

Step 2: Apply the gratuity formula.

G = 2000 × 9 × 15 / 26

G = 270,000 / 26

G = 10,384.62

The gratuity payable is $10,384.62.

Taxation Rules for Gratuity

Gratuity is taxable, but certain exemptions are available under the Income Tax Act. The exemptions depend on the type of employer:

Government employees: Full tax exemption on the entire gratuity.
Non-government employees under the Gratuity Act: Tax exemption on the lowest of:
- ₹20 lakh
- Actual gratuity received
- Eligible gratuity amount

For employees not covered by the Gratuity Act, the exemption is on the smallest of:

Half a month’s average salary × Years of service
Maximum of ₹20 lakh
Entire gratuity received

How Does This Gratuity Calculator Work?

✔️ Enter your salary (Basic + DA)

✔️ Enter the years of service (minimum 5 years required)

✔️ Click “CALCULATE”

✔️ The calculator estimates the total gratuity payable

Important points:

Maximum gratuity under the Gratuity Act is ₹20 lakh; any excess is ex-gratia.
Service years are rounded: 1 year 6 months counts as 2 years, 1 year 4 months counts as 1 year.

FAQs

What does 15/26 mean in gratuity calculation?

15 represents 15 days’ salary for each year of service, and 26 represents the working days in a month (excluding weekly offs).

When is gratuity paid?

Gratuity is paid upon:

Retirement
Resignation
Death
Termination

What is the Gratuity Act?

The Payment of Gratuity Act, 1972 mandates employers to pay gratuity to employees for long-term service in factories, mines, shops, or establishments with 10+ workers.

What is Dearness Allowance (D.A)?

D.A is an allowance to offset inflation, provided to government employees and retirees in India, Pakistan, and Bangladesh.

What is Ex-Gratia?

Ex-gratia is a voluntary payment by the employer above the ₹20 lakh gratuity limit and is not a legal entitlement.

Resources

Centre clears bill to double tax-free gratuity to Rs 20 lakh - Economic Times of India

Payment of Gratuity in India - Chief Labour Commissioner (Central)