Gratuity Calculator (India)
Gratuity Calculator – Calculate Your Gratuity Amount Online
Planning your financial future after years of dedicated service? Understanding your gratuity entitlement is essential for retirement planning. Our gratuity calculator helps you estimate your gratuity amount online accurately according to Indian laws.
Whether you want to check gratuity eligibility, know the gratuity amount calculation online, or learn about the gratuity tax rules, this comprehensive guide explains everything about the Payment of Gratuity Act India 1972 and the gratuity payment process.
📌 Table of Contents
- What is Gratuity?
- Legal Background: Payment of Gratuity Act 1972
- Who is Eligible for Gratuity?
- Gratuity Calculation Formula Explained
- Worked Examples of Gratuity Calculation
- Gratuity Act vs Non-Act: Key Differences
- Gratuity Payment Process and Timelines
- Is Gratuity Taxable? Tax Rules Explained
- Your Legal Rights and How to Claim Gratuity
- Gratuity in Retirement Planning
- Gratuity Compared with Other Employee Benefits
- Frequently Asked Questions (FAQs)
- Related Tools & Resources
What is Gratuity?
Gratuity is a statutory benefit and a lump sum payment made by an employer to employees as a token of appreciation for their long-term service. It is usually paid at retirement, resignation (after meeting eligibility), or termination.
The gratuity amount provides financial security and helps employees manage post-retirement expenses. This gratuity calculator helps you understand your potential gratuity payout based on your salary and years of service.
Legal Background: Payment of Gratuity Act 1972
The Payment of Gratuity Act 1972 is a central legislation in India that mandates gratuity payment to employees in eligible organizations. The Act protects employee rights and prescribes the rules for gratuity calculation and payment timelines.
Highlights of the Payment of Gratuity Act India:
- Applicable to establishments with 10 or more employees.
- Mandatory payment of gratuity after minimum 5 years of continuous service.
- Defines formula for gratuity calculation based on last drawn salary.
- Prescribes maximum gratuity limit (currently ₹20 lakh).
- Provides for legal penalties for non-compliance.
To know more, visit the official Payment of Gratuity Act document.
Who is Eligible for Gratuity?
Gratuity eligibility depends on the following factors:
- Continuous service of at least 5 years (waived in case of death or permanent disability).
- Employment in an organization covered by the Payment of Gratuity Act India.
- Employees in both government and private sectors.
- Gratuity payable on retirement, resignation (after 5 years), death, or permanent disability.
Use this gratuity calculator to check your gratuity eligibility and estimate your payout amount accurately.
Gratuity Calculation Formula Explained
The gratuity amount is calculated using the prescribed formulas under the Payment of Gratuity Act for Act-covered employees and a slightly different formula for Non-Act employees.
Formula for Act-Covered Employees
Gratuity = (Last Drawn Salary × 15 × Number of Years of Service) ÷ 26
Where Last Drawn Salary is the sum of basic salary and dearness allowance (DA).
Formula for Non-Act Employees
Gratuity = (Last Drawn Salary × 15 × Number of Years of Service) ÷ 30
This formula is used for companies not covered under the Payment of Gratuity Act and calculates gratuity on 30 days per month basis.
Note: Partial years are rounded up if 6 months or more.
Worked Examples of Gratuity Calculation
Example 1: Act-Covered Employee
Ramesh Kumar, working for XYZ Pvt Ltd (covered under the Payment of Gratuity Act), served for 12 years and 8 months (rounded to 13 years) with a last drawn salary of ₹40,000.
Gratuity = (40,000 × 15 × 13) ÷ 26 = ₹3,00,000
Example 2: Non-Act Employee
Seema Gupta works for a small startup not covered by the Act. She served 6 years 4 months (rounded to 6 years) with a last drawn salary of ₹35,000.
Gratuity = (35,000 × 15 × 6) ÷ 30 = ₹1,05,000
Gratuity Act vs Non-Act: Key Differences
| Factor | Act-Covered Employees | Non-Act Employees |
|---|---|---|
| Applicability | Mandatory for organizations with 10+ employees | Voluntary gratuity payment by employer discretion |
| Calculation Basis | Divide by 26 working days | Divide by 30 calendar days |
| Legal Binding | Statutory, with penalties for non-payment | No statutory requirement |
| Eligibility | Minimum 5 years continuous service (except death/disability) | Varies as per employer policy |
| Maximum Limit | ₹20 lakh (revised by Govt periodically) | No fixed maximum limit |
Gratuity Payment Process and Timelines
The gratuity payment process involves the following steps:
- Employee submits gratuity claim with necessary documents.
- Employer verifies service period and salary details.
- Gratuity calculated using the appropriate formula.
- Payment made within 30 days of becoming payable as per the Payment of Gratuity Act India.
- Delays attract interest and legal penalties.
Is Gratuity Taxable? Tax Rules Explained
Gratuity enjoys tax exemption up to prescribed limits depending on your employment type:
Government Employees
Fully exempt under Section 10(10)(i) of the Income Tax Act.
Private Sector Employees Covered by the Act
Exempt up to ₹20 lakh gratuity received.
Non-Act Employees
Exemption limited to least of:
- ₹20 lakh
- Actual gratuity received
- 15 days’ salary for each completed year of service
Learn more on the Income Tax Department’s official gratuity tax rules page.
Your Legal Rights and How to Claim Gratuity
Employees have the right to receive gratuity timely after fulfilling eligibility and can legally claim it if denied or delayed.
Gratuity in Retirement Planning
Gratuity forms a vital part of retirement corpus, offering financial stability post-retirement alongside provident fund and pension.
Gratuity Compared with Other Employee Benefits
| Benefit | Purpose | Payment Timing | Tax Treatment |
|---|---|---|---|
| Gratuity | Lump sum for long-term service appreciation | At retirement/resignation/termination | Exempt up to ₹20 lakh |
| Provident Fund (PF) | Retirement savings | Withdrawable post-retirement or conditions | Generally tax-exempt |
| Pension | Regular post-retirement income | Monthly after retirement | Taxable |
| Leave Encashment | Payment for unused leave | During or after employment | Partially exempt in some cases |
Frequently Asked Questions (FAQs)
1. Is gratuity payable if I resign before 5 years?
No, unless it is due to death or permanent disability.
2. Can I get gratuity if my company has less than 10 employees?
The Payment of Gratuity Act does not apply to such companies, but some employers may pay gratuity voluntarily.
3. What if my employer denies gratuity payment?
You can approach the labor commissioner or file a legal complaint under the Payment of Gratuity Act.
4. Is gratuity included in my salary for PF calculations?
No, gratuity is a separate benefit and not part of PF calculations.
5. How soon should gratuity be paid after retirement?
The Act mandates payment within 30 days of becoming payable.
6. Are bonuses included in gratuity calculations?
No, only basic salary and dearness allowance are considered for calculation.
7. Can gratuity be forfeited?
Yes, if the employee is terminated for proven misconduct, gratuity can be forfeited as per the Act.
8. Is gratuity amount fixed for all employees?
No, it varies depending on salary, years of service, and whether the company is covered under the Act.
9. How is partial year of service treated in gratuity?
Generally, service of 6 months or more is rounded up to 1 year, less than 6 months is ignored.
10. Can I calculate gratuity online?
Yes, use the calculator above by entering your last drawn salary and years of service.
Related Tools & Resources
- Income Tax Calculator – Calculate your tax liabilities
- Pension Planner – Plan your retirement pension
- Age Calculator – Calculate age for retirement planning
- Payment of Gratuity Act, 1972 (Official PDF)
- Income Tax India – Gratuity Tax Rules
Last updated : April 18 , 2026