Estimate the gratuity you'll receive from your employer after 5+ years of continuous service.
Gratuity is a statutory benefit paid by an employer to an employee as a token of appreciation for their long-term service. In India, employees who have completed at least 5 years of continuous service are eligible.
The calculation uses 15 days of salary for every year worked, where a month is considered to have 26 working days. "Salary" here specifically refers to your Basic Pay plus Dearness Allowance (DA).
Gratuity is a significant retirement benefit provided by employers in India to employees who have rendered at least five years of continuous service. It acts as a "thank you" gesture for your loyalty and tenure. Our Gratuity Calculator is updated with the latest regulations, allowing you to find your exact entitlement based on your salary and years of service.
The factor 15/26 represents 15 days of salary out of 26 working days in a month.
To qualify for gratuity, an employee must have completed five years of continuous service with the same organization. However, the law provides relief for the final year of service: if you have worked for more than 6 months in your last year (e.g., 4 years and 7 months), it is rounded up to the next full year (5 years) for eligibility and calculation purposes.
Government employees (Central and State) enjoy fully tax-exempt gratuity payments. For private-sector employees, the tax exemption is capped at ₹20 Lakhs. Any amount received above this limit is added to your total income and taxed according to your applicable income tax slab. This limit was increased from ₹10 Lakhs to ₹20 Lakhs in 2018 to provide better relief to senior professionals.
Many employees make the mistake of using their 'Total CTC' or 'Net Take-home' for this calculation. For the purpose of the Gratuity Act, 'Salary' only includes Basic Pay and Dearness Allowance (DA). HRA, Special Allowance, LTA, and Performance Bonuses are excluded. If your DA is zero, only your Basic Pay is used.
While most companies with 10+ employees are 'Covered' under the Act, some organizations are 'Not Covered'. For such employees, the calculation slightly changes: Gratuity = (Average Salary of last 10 months × 1/2) × Number of years. In this case, 15 days of salary is calculated as half of the average monthly salary, and tenure is not rounded up (only completed years are counted).
A professional leaving after 10 years and 8 months.
A senior manager retiring after 30 years.
Gratuity is a monetary benefit given by an employer to an employee in recognition of long-term service. It is governed by the Payment of Gratuity Act, 1972.
Yes, an employee must complete at least 5 years of continuous service with the same employer to be eligible for gratuity (except in cases of death or disablement).
For employees covered under the Act: Gratuity = (Last Drawn Salary × 15/26) × Number of years of service.
For government employees, it is fully tax-free. For private employees, it is tax-free up to a limit of ₹20 Lakhs (as of 2024).
Salary for gratuity includes 'Basic Pay' + 'Dearness Allowance (DA)'. It does not include HRA, Bonus, or other allowances.
If the service period exceeds 6 months in the final year, it is rounded up. So 5 years and 7 months is treated as 6 years for calculation.
An employer cannot refuse gratuity if you are eligible, unless your services were terminated for an offense involving moral turpitude or disorderly conduct.
Gratuity applies to employees on the company payroll. Contractors are usually not covered unless they are treated as de-facto employees.
Under the Act, the maximum tax-free gratuity an employer is mandated to pay is ₹20 Lakhs. Employers can pay more, but the excess will be taxable.
The Act assumes 26 working days in a month. 15 days' salary is calculated as (Monthly Salary / 26) * 15.