About Gratuity Calculator
Gratuity is a statutory benefit payable to employees who have completed 5 or more years of continuous service with an employer. It is governed by the Payment of Gratuity Act, 1972 and applies to establishments with 10 or more employees.
Formula for covered employees: Gratuity = (Last Basic + DA) ร 15/26 ร Number of years. The "15/26" represents 15 working days out of 26 working days in a month. For non-covered employees: Gratuity = (Last Basic + DA) ร 15/30 ร Number of years. Maximum gratuity payable is โน20 lakh (enhanced from โน10L in 2018).
Months of service are rounded: if months โฅ 6, one extra year is counted for covered employees. Gratuity is fully tax-free for government employees and tax-free up to โน20L for private sector covered employees.
Frequently Asked Questions
Who is eligible for gratuity in India?+
Any employee who has completed 5 or more years of continuous service is eligible for gratuity at the time of retirement, resignation, retrenchment or death/disability. For death/disability, the 5-year rule is waived.
What is the gratuity formula for private sector employees?+
For establishments covered under Gratuity Act: Gratuity = Last Basic+DA ร 15/26 ร Years of service. For non-covered (below 10 employees): Gratuity = Last Basic+DA ร 15/30 ร Years of service.
Is gratuity taxable?+
Government employees: fully tax-free. Private sector covered under Gratuity Act: tax-free up to โน20 lakh. Private sector not covered: tax-free up to โน10 lakh or actual gratuity, whichever is lower. Excess is taxable as income.
How are months of service counted for gratuity?+
For covered employees, if months in the last year โฅ 6, it is rounded to the next full year. So 10 years and 7 months = 11 years. For non-covered, actual months/12 fraction is used.
What is the maximum gratuity amount in India?+
The maximum gratuity payable under the Gratuity Act is โน20 lakh (โน20,00,000). This limit was increased from โน10 lakh in 2018 and further increases are subject to government notification.