Use this free Gratuity Calculator India 2025 to find out how much you’re eligible to receive on resignation or retirement. Learn eligibility rules, tax exemptions, and how to plan smartly for your future benefits.
If you’re a salaried employee in India, gratuity is one of the most important post-employment benefits you’re entitled to. Whether you’re planning early retirement, switching jobs, or simply organizing your finances, understanding how your gratuity is calculated can help you plan better.
Our Gratuity Calculator India helps you instantly calculate your eligible gratuity amount based on your last drawn salary and years of service—without the guesswork. But before using the tool, it’s crucial to understand the rules, eligibility criteria, and calculation methods that determine your final payout.
What is Gratuity?
Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for their service to the company. It is governed under the Payment of Gratuity Act, 1972, and becomes payable once an employee completes a minimum of five years of continuous service with the same employer.
Unlike the Employees’ Provident Fund (EPF), gratuity is entirely employer-funded, meaning there is no monthly contribution deducted from your salary. It acts as a financial cushion, especially when you retire, resign, or are laid off due to reasons such as health issues or company downsizing.
Gratuity Calculator
Eligibility Criteria for Gratuity in India
To claim gratuity benefits, certain conditions must be fulfilled. Here’s a breakdown of who is eligible under the Payment of Gratuity Act:
| Criteria | Details |
|---|---|
| Minimum Service Requirement | 5 continuous years (some exceptions apply) |
| Type of Employment | Full-time salaried employees (not contractual or interns) |
| Company Size | At least 10 employees on any day in the preceding 12 months |
| Payment Trigger | Retirement, resignation, death, disability, or termination |
Exceptions: In the case of death or disability, the five-year minimum is waived off and gratuity becomes payable regardless of the service duration.
For a detailed look at the official guidelines, refer to the Ministry of Labour and Employment’s gratuity page.
How is Gratuity Calculated?
Gratuity calculation depends on whether your employer is covered under the Gratuity Act or not. While most organized sector employers fall under this law, there are still a few exceptions.
For Employers Covered Under the Gratuity Act
The formula used is:
Gratuity = (15 × Last Drawn Salary × Number of Completed Years of Service) ÷ 26
Where:
- Last drawn salary = Basic + Dearness Allowance (DA)
- 15 is the number of days’ salary for every completed year
- 26 is considered as the number of working days in a month
Example:
If your basic + DA is ₹40,000 and you have worked for 10 years, your gratuity will be:
(15 × 40,000 × 10) ÷ 26 = ₹2,30,769
For Employers Not Covered Under the Gratuity Act
The calculation changes slightly:
Gratuity = (15 × Last Drawn Salary × Number of Completed Years of Service) ÷ 30
In this case, 30 is used as the divisor, reflecting a full calendar month.
Gratuity Calculation Table
| Years of Service | Last Drawn Salary (₹) | Gratuity Amount (₹) (Under Act) |
|---|---|---|
| 5 | 30,000 | 86,538 |
| 10 | 40,000 | 2,30,769 |
| 15 | 50,000 | 4,32,692 |
| 20 | 60,000 | 6,92,307 |
This table is indicative and may vary depending on the exact number of days worked and specific company policies.
You can verify gratuity limits and taxation slabs via the Income Tax Department’s official FAQ.
Tax Implications on Gratuity in India
While gratuity is a form of retirement benefit, it isn’t always fully exempt from tax. The Income Tax Act, 1961 provides clear guidelines on how gratuity is taxed based on the type of employment—government, non-government covered under the Gratuity Act, or private sector not covered under the Act.
Tax Treatment for Different Employee Categories
| Employee Type | Tax Exemption |
|---|---|
| Central/State Government Employees | Entire gratuity amount is tax-exempt. |
| Non-Government Employees (Covered Under Act) | Exempt up to ₹20,00,000 or actual gratuity received, whichever is lower. |
| Private Sector Employees (Not Covered) | Exempt up to ₹20,00,000 or 15 days’ salary for each year of service (based on average salary of last 10 months), whichever is lower. |
The ₹20 lakh exemption limit is lifetime and includes all gratuity payments received from multiple employers.
To avoid miscalculations, employees should consult with a tax advisor or cross-verify with the latest Section 10(10) of the Income Tax Act, which governs gratuity taxation in India.
Real-World Examples: Gratuity Calculation for Different Employees
Let’s walk through two examples—one from the private sector, and one from the government sector—to illustrate how gratuity calculation works in real-life scenarios.
Example 1: Private Sector Employee (Covered Under Gratuity Act)
- Name: Ramesh Sharma
- Basic + DA: ₹35,000
- Years of Service: 9 years
- Formula: (15 × 35,000 × 9) ÷ 26
- Gratuity: ₹1,81,731
Since this is below the ₹20 lakh tax-exemption cap, it is entirely tax-free.
Example 2: Government Employee
- Name: Meena Kumari
- Last Drawn Salary: ₹75,000
- Years of Service: 20 years
- Gratuity: (15 × 75,000 × 20) ÷ 26 = ₹8,65,385
As a state government employee, her gratuity is fully exempt from income tax.
What Inputs Do You Need to Use the Gratuity Calculator?
Using a gratuity calculator online requires only a few basic details. Here’s what you need to enter:
| Input Field | Description |
|---|---|
| Last Drawn Salary | Monthly Basic Pay + Dearness Allowance |
| Years of Service | Total number of completed years with the current employer |
| Employee Type | Government, Private (covered), or Private (not covered) |
| Gratuity Act Applicability | Whether your employer is covered under the Payment of Gratuity Act |
The tool automatically applies the correct formula based on your inputs and displays the gratuity amount you’re eligible for.
Many trusted financial portals like BankBazaar also offer online calculators, but it’s advisable to understand the logic before relying on third-party tools.
Key Factors That Influence Your Gratuity Amount
While the formula is standard, several practical elements can impact the final gratuity payout:
- Incomplete Year of Service: If the remaining months exceed 6, it is rounded off as a full year.
- Variability in Salary: Only Basic + DA is considered, not gross or CTC.
- Multiple Employers: Gratuity is calculated per employer, not cumulative unless stated otherwise.
- Resignation vs. Termination: Resignation after 5 years is eligible; termination under disciplinary action may disqualify gratuity benefits.
Understanding these variables ensures you’re not caught off guard while planning your retirement or job change.
Step-by-Step: How to Use the Gratuity Calculator India Tool
Whether you’re a government employee or working in the private sector, calculating gratuity online is now just a few clicks away. Here’s how you can do it:
Step 1: Enter Your Basic Details
- Name (optional)
- Last Drawn Salary (Basic + DA only)
- Total Years of Service (rounded off as per rules)
- Employee Type: Choose from government, private covered, or private not covered
Step 2: Select Gratuity Act Applicability
If you work in an organization with more than 10 employees, it’s likely you’re covered under the Payment of Gratuity Act, 1972. Select accordingly to apply the correct calculation method.
Step 3: Hit ‘Calculate’ to View Your Results
The calculator will instantly show your eligible gratuity amount, tax-free limit, and if applicable, the taxable portion.
You can also verify eligibility conditions directly via the Ministry of Labour & Employment, which governs gratuity disbursal and disputes.
Private vs Government Employee: Gratuity Rules Comparison
Here’s how gratuity rules vary between government and private sector employees, especially when it comes to taxation, formula, and eligibility:
| Aspect | Government Employees | Private Employees (Under Act) |
|---|---|---|
| Eligibility | After 5 years of continuous service | After 5 years of continuous service |
| Taxation | Fully tax-exempt | Up to ₹20 lakh exempt under Income Tax Act |
| Formula Used | (15 × salary × years) ÷ 26 | (15 × salary × years) ÷ 26 |
| Act Applicability | Governed by government service rules | Covered under the Payment of Gratuity Act, 1972 |
| Maximum Limit (As per Act) | ₹20,00,000 (revised from ₹10 lakh in 2019) | ₹20,00,000 (as notified by Central Government) |
This differentiation is essential for private employees, especially when switching jobs or planning voluntary retirement. Even public sector undertakings (PSUs) have distinct policies, but most align with the Payment of Gratuity Act provisions.
Important Rules from the Payment of Gratuity Act, 1972
Some key provisions that employees must be aware of under this Act include:
- Applicability: Mandatory for companies with 10 or more employees in the preceding 12 months.
- Minimum Service: 5 years continuous service is mandatory, except in case of death or disablement.
- Calculation: Gratuity is calculated based only on Basic + Dearness Allowance, not full CTC.
- Forfeiture Clause: Employers can partially or fully forfeit gratuity in cases of misconduct, fraud, or moral turpitude.
These rules are legally binding, and any deviation can be challenged in a labour court or filed through the Central Government Industrial Tribunal.
Who is Not Eligible for Gratuity?
Although most salaried employees are eligible after 5 years of service, gratuity can be denied under certain situations:
- Employees terminated for disciplinary misconduct
- Those who leave jobs before completing 5 years
- Apprentices or trainees without formal employment terms
- Companies not covered under the Act (in which case employer discretion may apply)
Hence, while gratuity is a statutory benefit, it’s also subject to basic qualifying conditions.
Frequently Asked Questions About Gratuity Calculator India
Gratuity is one of the most commonly misunderstood components of employee compensation in India. Let’s answer some frequently asked questions to bring clarity to the topic.
1. Can I receive gratuity if I resign before 5 years?
No. As per the Payment of Gratuity Act, 1972, gratuity is only payable after the completion of 5 years of continuous service. However, in case of death or permanent disablement, this condition is waived. You can review the official notification on the EPFO website to understand exceptions.
2. Is gratuity taxed in India?
Yes, but partially. The Income Tax Act allows tax exemption on gratuity up to ₹20,00,000 for private employees covered under the Act. Any amount above that is added to your income and taxed according to your income tax slab. For government employees, the entire gratuity amount is tax-free, irrespective of the amount.
3. Is there any change in gratuity rules after 2023?
No major changes have been officially notified yet post-2023. However, discussions about reducing the minimum service period or linking gratuity more directly with the Code on Social Security, 2020 are ongoing. You may check updates on PRS Legislative Research for the latest policy discussions.
4. Can I use this gratuity calculator India for PSU or contractual jobs?
Yes and no. For regular PSU employees, the gratuity calculator applies as long as they are governed under gratuity rules similar to the Payment of Gratuity Act. For contractual or fixed-term employees, gratuity applicability varies. If the employee has completed 5 continuous years and the organization is covered under the Act, gratuity may still be due.
Common Mistakes to Avoid While Calculating Gratuity
When using any gratuity calculator India tool online, accuracy depends on correct inputs. Here are common mistakes users must avoid:
| Mistake | Why It Matters |
|---|---|
| Including HRA or Bonus in Salary | Only Basic + DA should be used for calculation |
| Rounding off service years improperly | Partial years may or may not count, depending on rounding rules |
| Not selecting the correct employee type | Government vs private employees have different tax treatment |
| Ignoring tax implications | Exceeding ₹20 lakh leads to taxable gratuity for private jobs |
| Assuming all companies pay gratuity | Companies with less than 10 employees may not be liable |
These mistakes can lead to incorrect gratuity projections and expectations. Always refer to your offer letter, HR policy, and employment contract for clarification.
Gratuity Myths vs Facts
Many employees form assumptions about gratuity based on hearsay or outdated information. Here’s a reality check:
| Myth | Fact |
|---|---|
| Gratuity is part of monthly salary | Gratuity is paid at the end of employment, not monthly |
| Every employee gets gratuity after 3 years | Only after 5 years of continuous service (unless exception applies) |
| Gratuity is same for all sectors | Formula, tax, and limits differ for private and government employees |
| Employer can deny gratuity at will | It is a statutory right under law if eligibility is met |
| Freelancers or consultants can claim gratuity | Only formal employees with a valid contract are eligible |
By clearing up these misconceptions, users can better use the gratuity calculator and plan financial decisions accordingly.
Gratuity Calculator India: Key Takeaways for Employees
Understanding and using the gratuity calculator India effectively can help employees prepare better for retirement or job transitions. Here’s what you should remember:
- Gratuity eligibility begins only after completing 5 continuous years in one organization, except in cases of death or disability.
- The formula:
(Last Drawn Basic Salary + Dearness Allowance) × 15/26 × Number of Completed Years
- For government employees, the entire gratuity is tax-free, while private employees can claim tax exemption up to ₹20,00,000.
- Use only Basic + DA for calculations—excluding HRA, performance bonuses, or other variable allowances.
- Always verify company-specific gratuity policy and employment contract clauses.
- Keep updated with changes under the Code on Social Security, 2020, as gratuity eligibility and ceiling limits may evolve in future.
Tax Planning Tips Using Gratuity Calculator India
If your gratuity amount exceeds the tax-free threshold or you’re planning to switch jobs, consider these strategies to optimize tax:
| Strategy | How It Helps |
|---|---|
| Plan your exit timing | If nearing the 5-year mark, delay resignation to qualify for gratuity |
| Split exits for tax planning | Avoid crossing ₹20 lakh in a single financial year |
| Invest exempt gratuity in tax-saving schemes | Use it in 80C instruments like PPF, ELSS, or NPS for additional benefits |
| Claim relief under Section 89(1) | Helps reduce tax burden by spreading income over years |
For in-depth guidance on gratuity tax exemptions, you can refer to Income Tax India’s official circular and consult a certified tax advisor.
Final Thoughts: Why Use a Gratuity Calculator India Tool?
A gratuity calculator India tool isn’t just a convenience—it’s a necessity in financial planning. As workplace benefits grow more complex and employees change jobs frequently, understanding the gratuity component helps in:
- Making informed job decisions
- Planning early retirement
- Knowing legal rights
- Estimating post-retirement corpus
Whether you’re a private employee in an MNC or a public sector professional, using the calculator empowers you with accurate, real-time results and removes ambiguity.
FAQ
What is a gratuity calculator?
A gratuity calculator helps employees calculate the amount they are eligible for on retirement, resignation, or death after 5 years of service.
Who is eligible to receive gratuity in India?
Employees who have completed 5 or more years of continuous service in an organization are eligible to receive gratuity under the Payment of Gratuity Act.
Is gratuity taxable in India?
Gratuity is tax-free up to ₹20 lakh for private employees and fully exempt for government employees under current tax rules.
How is gratuity calculated?
Gratuity = (Last Basic Salary + DA) × 15/26 × Number of Years of Service. For daily wage workers, it is calculated differently.
Can I get gratuity before 5 years?
Gratuity is usually given after 5 years, but in cases of death or permanent disability, it may be paid earlier.
Is the gratuity ceiling likely to increase?
Yes, as per [Code on Social Security, 2020](https://labour.gov.in/sites/default/files/SS_Code_Gazette.pdf), future changes in the ceiling limit are expected, depending on government notifications.
How can I claim my gratuity?
You can claim gratuity by submitting Form I to your employer within 30 days of leaving the job. The employer must pay within 30 days of the claim.
Where can I learn more about gratuity laws in India?
You can visit [Income Tax India](https://www.incometax.gov.in/) or refer to the Payment of Gratuity Act on [India Code](https://www.indiacode.nic.in/).