Gratuity is a token of gratitude from an employer to an employee for years of dedicated service. If you have worked in a company for 5 or more years, you are entitled to gratuity under the Payment of Gratuity Act, 1972. This Gratuity Calculator instantly computes your entitlement based on basic salary and service duration.
What Is Gratuity?
Gratuity is a lump-sum payment made by an employer to an employee who has completed a minimum of 5 years of continuous service. It is paid at the time of retirement, resignation, or upon death or disability. Gratuity is regulated by the Payment of Gratuity Act, 1972 in India and applies to establishments with 10 or more employees.
Gratuity Formula
Gratuity = (Basic Salary + DA) × 15/26 × Years of Service
Where:
- 15 = Number of days' wage per year of service
- 26 = Working days in a month (excluding 4 Sundays)
- DA = Dearness Allowance
Example Calculation
Scenario: An employee with a Basic + DA of ₹40,000/month completes 8 years of service.
- Gratuity = ₹40,000 × (15/26) × 8
- Gratuity = ₹40,000 × 0.5769 × 8
- Gratuity = ₹1,84,615
How to Use This Gratuity Calculator
- Enter Basic Salary + DA: Input your last drawn basic salary plus dearness allowance per month.
- Enter Years of Service: Total number of complete years you worked at the company.
- Click Calculate: Get your exact gratuity entitlement instantly.
Key Rules About Gratuity in India
- Minimum Service: Must have completed 5 years of continuous service (4.5+ years rounds up to 5).
- Maximum Limit: Gratuity is capped at ₹20 lakhs as per latest regulations.
- Tax Exemption: Government employees: fully exempt. Private employees: exempt up to ₹20 lakhs.
- Death / Disability: Gratuity is payable even if the employee hasn't completed 5 years, in case of death or permanent disability.
- Forfeiture: An employer can forfeit gratuity if the employee is dismissed for misconduct causing damage or loss.
Gratuity for Non-Covered Organizations
For employees in organizations not covered under the Gratuity Act, the formula changes slightly:
Gratuity = (Basic + DA × ½ × Years of Service)
Frequently Asked Questions (FAQs)
1. Is 4 years 8 months considered 5 years for gratuity?
Yes. If you have completed more than 4 years and 6 months, it is rounded up to 5 years.
2. Is gratuity taxable?
Government employees: fully exempt. Private employees: exempt up to ₹20 lakhs per their lifetime.
3. Is gratuity part of CTC?
Yes, many companies include gratuity provision (~4.81% of basic salary) as part of the CTC package.
4. Can gratuity be claimed before 5 years?
Generally no, unless in case of death, disability, or under specific government-notified schemes.
5. Is this gratuity calculator free?
Yes, completely free. No personal data is stored.
Common Use Cases for Gratuity Calculator
- Use this Gratuity Calculator for quick, accurate online calculations — no app needed
- Ideal for students, professionals, and anyone planning finances or health goals
- Get instant results right in your browser — 100% private, no data stored
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