Gratuity Calculator
Estimate your statutory gratuity payout under the Payment of Gratuity Act 1972 using your last drawn basic salary and tenure of service.
Eligibility Benchmark
Standard statutory gratuity requires a minimum of 5 years of continuous service in the organization (exempted in case of disability or fatal injury).
Understanding Statutory Gratuity Provisions in India
Gratuity is a monetary benefit offered by employers to honor long-term dedication and continuous service. Governed by the Payment of Gratuity Act 1972, this lump-sum benefit is payable to eligible workforce members upon retirement, resignation, superannuation, or job transition after completing a minimum specified tenure.
Statutory Gratuity Calculation Formula
For organizations covered under the Gratuity Act, the statutory payout formula evaluates 15 days of last drawn basic earnings for every completed year of service:
// Standard Gratuity Formula
Gratuity (G) = (Years of Service × Last Basic Pay & DA × 15) ÷ 26
*Where 15 represents 15 working days per year and 26 represents standard monthly working days excluding weekly off-days.
Illustration Example
Suppose an employee completes 5 years of continuous service with a final monthly basic salary + DA of ₹30,000.
Gratuity = (5 × 30,000 × 15) ÷ 26 = ₹86,538.46
Important Statutory Provisions & Service Tenure Rounding
Tenure Rounding Rules
Service periods exceeding 6 months in the final year are rounded up to a full year (e.g., 17 years 7 months = 18 years). Tenures below 6 months are rounded down (e.g., 16 years 4 months = 16 years).
5-Year Eligibility Criteria
Completion of 5 continuous years is compulsory for standard departure payouts. However, this 5-year requirement is waived in case of accidental disability or death.
Maximum Gratuity Limit
As per the latest 2018 amendment, the maximum tax-free gratuity payable under the Act is capped at ₹20 Lakhs. Any voluntary payment over this limit is taxable.
Employer Coverage Rules
The Payment of Gratuity Act applies to all mines, oilfields, plantations, ports, railways, companies, and shops employing 10 or more people on any day of the year.
Taxation Guidelines for Gratuity Received
| Employee Category | Income Tax Exemption Status |
|---|---|
| Government Employees (Central / State / Local) | 100% Tax-Exempt (Fully exempt under Income Tax Act) |
| Private Sector Covered under Gratuity Act 1972 | Exempt up to minimum of: (1) Actual Gratuity, (2) Statutory Ceiling of ₹20 Lakhs, or (3) Formula Payout. |
| Private Sector Not Covered under Gratuity Act | Exempt up to minimum of: (1) Half month salary per year served, or (2) ₹20 Lakhs. |
Frequently Asked Questions (FAQs)
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