What is Gratuity?

Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their long service. It's governed by the Payment of Gratuity Act, 1972, and applies to establishments with 10 or more employees.

Eligibility for Gratuity

• Minimum 5 years of continuous service
• Applicable on retirement, resignation, superannuation, or death
• 5 years not required in case of death or disability

Gratuity Formula

Gratuity = (15 × Last Drawn Salary × Years of Service) ÷ 26

Where "Last Drawn Salary" = Basic + Dearness Allowance (DA).

Example Calculation

Salary = ₹50,000/month, Service = 10 years:

• Gratuity = (15 × 50,000 × 10) ÷ 26 = ₹2,88,462

Gratuity Tax Rules

• Exempt up to ₹20 lakh for private sector employees
• Government employees: fully exempt
• Amount above ₹20 lakh is taxable as per income tax slab

Points to Note

• Service of more than 6 months in a year counts as 1 full year
• Employer must pay within 30 days of it becoming due
• If delayed, employer pays interest
• Gratuity is not paid if terminated for misconduct

Why Use Our Gratuity Calculator?

Calculate your exact gratuity amount before leaving a job. Plan your finances with accurate numbers.