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Gratuity Calculator - Calculate Gratuity Amount Online

Calculate your gratuity amount accurately based on your last drawn salary and years of service. Get detailed breakdown under Payment of Gratuity Act 1972 with tax exemption details.

Why Our Gratuity Calculator is the Market Leader

📊 Most Accurate Calculations: Uses exact Payment of Gratuity Act 1972 formulas with automatic rounding rules for service years
💰 Comprehensive Tax Analysis: Calculates both taxable and exempt portions with actual tax savings estimation
📈 Visual Growth Projection: Interactive charts showing year-wise gratuity growth and tax implications
⚖️ Dual Formula Support: Automatically applies correct formula based on employer coverage (15/26 vs 15/30)
🔄 Real-time Updates: Always updated with latest gratuity rules and tax exemption limits
📱 Mobile-First Design: Optimized for all devices with intuitive sliders and instant calculations

Employment Details

₹15K ₹2L
Basic salary component of your last drawn salary
₹0 ₹1L
DA forming part of retirement benefits (Enter 0 if not applicable)
5 Years 40 Years
Total completed years of continuous service
0 Months 11 Months
If ≥6 months, it counts as additional year
Establishments with 10+ employees are usually covered
Affects tax exemption limits and calculation
Used to calculate tax savings on exempt portion

Your Gratuity Calculation

Total Gratuity Amount
₹6,92,308
Within ₹20L limit
Eligible Years
16 Years
Tax Exempt Amount
₹6,92,308
Taxable Amount
₹0
Tax Savings
₹1,38,462

Detailed Gratuity Calculation

Calculation Components

Component Amount
Basic Salary (Monthly) ₹50,000
Dearness Allowance (Monthly) ₹10,000
Last Drawn Salary (Basic + DA) ₹60,000
Total Service Years 15.5 Years
Eligible Years (Rounded) 16 Years
Employer Coverage Under Gratuity Act

Gratuity & Tax Details

Particulars Amount
Calculation Formula (60,000 × 15 × 16) ÷ 26
Gross Gratuity ₹6,92,308
Maximum Cap (Private) ₹20,00,000
Tax Exempt Amount ₹6,92,308
Taxable Amount ₹0
Estimated Tax Saved ₹1,38,462

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Gratuity Tips

  • Minimum 5 years of continuous service required for eligibility
  • Employer must pay within 30 days of becoming due
  • Service period >6 months in final year counts as full year
  • Tax exempt up to ₹20 lakh for private sector employees
  • Applies to establishments with 10 or more employees
  • Payable on retirement, resignation, death, or disability

Understanding Gratuity and Payment of Gratuity Act 1972

Gratuity is a statutory benefit provided by employers to employees as recognition for their long-term service. Governed by the Payment of Gratuity Act 1972, it serves as a financial reward and retirement benefit for employees who have dedicated years of service to an organization.

What is Gratuity?

Gratuity is a lump-sum payment made by employers to employees upon retirement, resignation, termination, death, or disability. It's calculated based on the employee's last drawn salary and years of service, providing financial security during career transitions or retirement.

Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ Working Days
Working Days: 26 for employers covered under Act | 30 for non-covered employers
Last Drawn Salary = Basic Salary + Dearness Allowance

Eligibility Criteria for Gratuity

  • Service Requirement: Minimum 5 years of continuous service with the same employer
  • Employer Coverage: Applicable to establishments with 10 or more employees
  • Employee Status: All employees including permanent, temporary, and contract workers (except apprentices)
  • Early Eligibility: Available before 5 years in case of death or disability

Gratuity Calculation Formula Comparison

Employer Type Formula Working Days Application
Covered under Act (Salary × 15 × Years) ÷ 26 26 days Establishments with 10+ employees
Not Covered (Salary × 15 × Years) ÷ 30 30 days Smaller establishments

Tax Implications of Gratuity

Gratuity taxation varies based on employee type and amount received. The Income Tax Act provides specific exemptions to reduce the tax burden on this retirement benefit.

  • Government Employees: Completely tax-free up to ₹25 lakh (increased from ₹20 lakh in 2024)
  • Private Sector (Covered): Tax-free up to ₹20 lakh under Section 10(10)
  • Private Sector (Non-covered): Tax-free up to ₹20 lakh with specific calculation method
  • Excess Amount: Any amount above exemption limit is taxable as per income tax slab

Recent Updates and Amendments

  • 2019 Amendment: Tax exemption limit increased from ₹10 lakh to ₹20 lakh for private sector
  • 2024 Update: Government employees' exemption limit raised to ₹25 lakh
  • New Wage Code: Proposes minimum 50% basic salary, potentially increasing gratuity amounts
  • Payment Timeline: Employers must pay within 30 days; failure attracts interest charges

Important Gratuity Rules

  • Service Calculation: If final year service exceeds 6 months, it's rounded up to full year
  • Maximum Limit: ₹20 lakh for private sector, ₹25 lakh for government employees
  • Nomination: Employees must nominate beneficiaries after completing one year of service
  • Portability: Not portable between employers; each employment is treated separately

Frequently Asked Questions about Gratuity Calculator

Gratuity is calculated as (Last drawn salary × 15 × Years of service) ÷ 26 for employers covered under the Act. Last drawn salary includes basic salary plus dearness allowance only. For non-covered employers, the divisor is 30 instead of 26.

Minimum 5 years of continuous service with the same employer is required for gratuity eligibility. However, gratuity is payable even before 5 years in case of employee's death or disability, ensuring protection for families.

Maximum gratuity is ₹20 lakh for private sector employees and ₹25 lakh for government employees as per current rules. Any excess amount above these limits is considered ex-gratia and may be taxable as per income tax regulations.

Gratuity is tax-exempt up to ₹20 lakh for private sector employees under Section 10(10) of Income Tax Act. Government employees enjoy complete exemption up to ₹25 lakh. Any amount exceeding these limits is taxable as per applicable income tax slabs.

Only completed years count towards gratuity calculation. If service in the final year exceeds 6 months, it's rounded up to the next full year for calculation purposes. For example, 15 years 8 months becomes 16 years for gratuity calculation.

Employers must pay gratuity within 30 days from the date it becomes due. Delay in payment attracts interest charges as per the Payment of Gratuity Act provisions. Employees can also file complaints for non-payment.

Only basic salary and dearness allowance (that forms part of retirement benefits) are included in gratuity calculation. Other allowances like HRA, transport allowance, or special allowances are not considered for gratuity computation.

Gratuity must be paid as a lump sum amount and cannot be paid in installments. The Payment of Gratuity Act mandates a single payment within 30 days of the amount becoming due to the employee or nominee.

Disclaimer: This gratuity calculator is for informational purposes only and does not constitute financial or legal advice. Actual gratuity calculations may vary based on specific employment terms, company policies, and applicable laws. Please consult your HR department or tax advisor for precise calculations and tax implications.

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