Gratuity Calculator
Calculate gratuity as per the Payment of Gratuity Act, 1972
Enter 0 if DA is not applicable (most private sector)
Note: 6+ additional months are rounded up to the next year
Gratuity Amount
₹2,88,462
Calculation Breakdown
Tax Treatment
Gratuity up to ₹20 lakh is fully tax-exempt for employees covered under the Act
Gratuity at Different Service Milestones
| Years of Service | Gratuity Amount | Tax Exempt | Eligible? |
|---|---|---|---|
| 5 years | ₹1,44,231 | ₹1,44,231 | ✓ Yes |
| 10 years | ₹2,88,462 | ₹2,88,462 | ✓ Yes |
| 15 years | ₹4,32,692 | ₹4,32,692 | ✓ Yes |
| 20 years | ₹5,76,923 | ₹5,76,923 | ✓ Yes |
| 25 years | ₹7,21,154 | ₹7,21,154 | ✓ Yes |
| 30 years | ₹8,65,385 | ₹8,65,385 | ✓ Yes |
Gratuity — Complete Guide to the Payment of Gratuity Act, 1972
Gratuity is one of the most important retirement benefits for salaried employees in India. It is a statutory payment made by employers to employees who have completed at least 5 years of continuous service. Understanding how gratuity works helps you plan your retirement finances and know your rights as an employee.
Legal Framework — The Payment of Gratuity Act, 1972
The Payment of Gratuity Act, 1972 governs gratuity payments in India. It applies to every factory, mine, oilfield, plantation, port, railway company, shop, or establishment where 10 or more employees are employed. Once an establishment is covered, it remains covered even if the number of employees falls below 10.
The Gratuity Formula Explained
For employees covered under the Act: Gratuity = (Basic + DA) × 15 × Years of Service / 26
The divisor 26 represents the number of working days in a month (excluding 4 Sundays). The 15 represents 15 days of salary per year of service.
For employees not covered under the Act: Gratuity = (Basic + DA) × 15 × Years of Service / 30
Here, 30 represents the total days in a month.
Service Period Calculation
For gratuity purposes, if an employee has completed more than 6 months in the last year of service, it is rounded up to a full year. For example, 10 years and 7 months is treated as 11 years. However, 10 years and 4 months is treated as 10 years.
Tax Exemption on Gratuity
Government employees: Entire gratuity is tax-free.
Private sector employees covered under the Act: Gratuity up to ₹20 lakh is tax-exempt. Amount above ₹20 lakh is taxable.
Private sector employees not covered under the Act: The least of the following is exempt: actual gratuity received, ₹20 lakh, or half month's average salary for each completed year of service.
Gratuity in Your CTC
Many employers include a gratuity provision in the CTC (Cost to Company). This is typically calculated as 4.81% of basic salary (15/26 × 1/12 × basic). However, this is just a provision — you only receive the actual gratuity when you leave after completing 5 years of service.
Protecting Your Gratuity Rights
- Nominate a beneficiary for your gratuity (important for death/disability cases)
- Keep records of your service period and salary history
- If gratuity is not paid within 30 days, you can file a complaint with the Controlling Authority
- Gratuity cannot be attached by courts for debt recovery
- Employers must insure their gratuity liability under an approved gratuity fund
Gratuity vs Other Retirement Benefits
Gratuity vs EPF: EPF is contributed monthly throughout service; gratuity is paid as a lump sum at exit. Both are important retirement benefits. EPF has higher total accumulation for long-serving employees.
Gratuity vs Leave Encashment: Leave encashment is payment for unused earned leave. Both are payable at retirement/resignation. Leave encashment has different tax treatment.