Gratuity Calculator
Calculate the gratuity amount you will receive based on your salary and service period.
Gratuity Calculator
Calculate gratuity amount based on your salary and years of service.
Understanding Gratuity Benefits in India
Gratuity is a defined benefit plan and a form of appreciation given by an employer to an employee for the services rendered to the organization. It's an important component of retirement benefits in India, regulated under the Payment of Gratuity Act, 1972.
Eligibility for Gratuity
To be eligible for gratuity, an employee must have completed at least 5 years of continuous service with the same employer. However, in case of death or disability, the 5-year rule is waived, and gratuity becomes payable immediately.
Gratuity Calculation Formulas
The formula for calculating gratuity depends on whether the employee is covered under the Payment of Gratuity Act:
- For employees covered under the Act:
Gratuity = (15 × Last drawn basic salary × Number of years of service) ÷ 26 - For government employees:
Gratuity = Last drawn basic salary × Number of years of service × 1/2
Gratuity Taxation
Gratuity payment is exempt from income tax up to certain limits:
- For government employees: Fully exempt from income tax
- For non-government employees covered under the Gratuity Act: Exempt up to ₹20 lakhs
- For non-government employees not covered under the Gratuity Act: Exempt based on the formula (1/2 × Average salary × Number of years of service)
Important Considerations
- The "last drawn salary" includes basic salary and dearness allowance
- For calculating years of service, any period above 6 months is considered as a full year
- The maximum gratuity amount that can be claimed tax-free was increased from ₹10 lakhs to ₹20 lakhs in 2018
- Employers with 10 or more employees must compulsorily pay gratuity
Planning for Gratuity
Employees should keep the following in mind regarding gratuity:
- Maintain proper service records to avoid disputes at the time of claiming gratuity
- Be aware of the tax implications if gratuity exceeds the exemption limit
- Consider gratuity as part of your retirement planning, but not as the only source
- Check if your employer maintains a gratuity fund with an insurance company or the LIC
Note: Gratuity regulations may change based on government policies. Always check the latest rules from official government sources for accurate information.