Gratuity Calculator

What is Gratuity?

Gratuity is a lump sum payment made by an employer to an employee as a reward for their long service. It is governed by the Payment of Gratuity Act, 1972, which applies to establishments with 10 or more employees.

Eligibility Criteria

• Minimum Service: 5 years of continuous service
• Exception: In case of death or disability, 5-year requirement is waived
• Resignation or Retirement: Employee must have completed 5 years
• Termination: Gratuity is payable unless terminated for specified misconduct

Gratuity Formula

Tax Treatment

• Government Employees: Fully exempt from income tax
• Private Sector (Gratuity Act): Exempt up to Rs 20 lakh
• Private Sector (Non-Act): Exempt up to lower of:
  • Rs 20 lakh
  • Half month basic for each completed year
  • Actual gratuity received

Rounding of Service Years

• If additional months are more than 6, round up to next year
• Example: 7 years 8 months = 8 years for calculation
• Example: 7 years 4 months = 7 years for calculation

Important Notes

• Gratuity must be paid within 30 days of it becoming payable
• Delay attracts interest at specified rates
• Maximum gratuity under the Act is currently Rs 20 lakh
• Employer can pay more than the statutory minimum
• Gratuity is forfeited in case of termination for misconduct causing damage