Gratuity Calculator India

Gratuity is a lump-sum benefit paid by employers to employees as a token of appreciation for their service. Under the Payment of Gratuity Act, 1972, any employee who has completed 5 or more years of continuous service is eligible. The Act applies to establishments with 10 or more employees. In cases of death or disability, the 5-year minimum is waived.

For private sector employees covered under the Act: Gratuity = (15 × Last Drawn Salary × Years of Service) ÷ 26. For government employees: Gratuity = (15 × Last Drawn Salary × Years of Service) ÷ 30. "Last Drawn Salary" means Basic Pay + Dearness Allowance (DA). The number 15 represents half a month’s wages for each year of service.

For government employees, the entire gratuity amount is fully exempt from income tax. For private sector employees, gratuity is tax-free up to ₹25,00,000 (₹25 Lakhs) under Section 10(10) of the Income Tax Act. Any amount exceeding ₹25 Lakhs is added to your taxable income and taxed at your applicable slab rate.

Under the Gratuity Act, if an employee has worked for 6 months or more beyond a completed year, the service is rounded up to the next full year. For example, 4 years 7 months = 5 years (eligible for gratuity), but 4 years 5 months = 4 years (not eligible). This rounding applies both for eligibility and for calculation purposes.

Yes. The Payment of Gratuity Act provides the minimum amount. Employers are free to pay more than the formula amount as a goodwill gesture. However, the tax exemption is limited to ₹25 Lakhs for non-government employees. Any amount above this cap — whether statutory or voluntary — will be taxable.