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Gratuity Calculator (India)
Gratuity Growth Over Years
Gratuity Calculation Rules
| Organization Type | Coverage | Formula | Exemption Limit |
|---|---|---|---|
| 10+ Employees | Covered under Act | (Salary × 15 × Years) ÷ 26 | ₹20,00,000 |
| <10 Employees | Not covered under Act | (Salary × 15 × Years) ÷ 30 | ₹20,00,000 |
Eligibility Criteria
- • Minimum 5 years of continuous service required
- • Death or disablement waives the 5-year requirement
- • Resignation after 5+ years makes you eligible
- • Termination due to misconduct forfeits gratuity
Calculation Notes
- • Months ≥6 are rounded up to next year
- • Months <6 are rounded down
- • Basic salary + DA is considered for calculation
- • Maximum gratuity capped at ₹20 lakhs (exempt)
What is Gratuity?
Gratuity is a lump sum payment made by an employer to an employee as a token of appreciation for services rendered. It's a retirement benefit provided under the Payment of Gratuity Act, 1972.
- Covered Organizations: Companies with 10 or more employees must provide gratuity.
- Tax Treatment: Up to ₹20 lakhs is tax-exempt. Amount above this limit is taxable.
- Payment Timeline: Must be paid within 30 days of becoming due.
This calculator provides estimates based on current rules. Actual gratuity may vary based on company policy and employment terms.
How Gratuity Is Calculated
Gratuity is a lump-sum retirement benefit an employer pays an employee for continuous service, typically after at least 5 years, on resignation, retirement, or in the event of death or disablement. This calculator applies the Payment of Gratuity Act, 1972 formula based on whether your organisation is covered under the Act.
Gratuity Formula
Covered under the Act (10+ employees): Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26. Not covered under the Act (fewer than 10 employees): Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 30.
Gratuity exemption limits and eligibility rules are set by the government and can be revised over time. Always verify the current exemption limit and your organisation's coverage status on the official labour ministry resources or with a tax professional before relying on this figure for filing.
Gratuity Calculator FAQs
What is the formula used to calculate gratuity?
For employees covered under the Payment of Gratuity Act (organisations with 10+ employees), Gratuity = (Last Drawn Salary × 15 × Years of Service) ÷ 26. For employees not covered under the Act, the divisor used is 30 instead of 26.
How many years of service do I need to be eligible for gratuity?
Generally, a minimum of 5 years of continuous service is required to be eligible for gratuity, except in cases of death or disablement, where the 5-year requirement is waived entirely.
How much of my gratuity is tax-exempt?
Gratuity received up to ₹20,00,000 (₹20 lakhs) is exempt from income tax. Any amount you receive above this limit is added to your taxable salary income and taxed at your applicable slab rate.
How are partial years of service counted?
If you have completed 6 months or more in your final year of service, it is rounded up to the next full year for gratuity calculation. Service of less than 6 months in the final year is rounded down and ignored.
Can gratuity be forfeited?
Yes. Gratuity can be forfeited, wholly or partly, if an employee is terminated for misconduct involving moral turpitude or for causing damage or loss to the employer, as permitted under the Payment of Gratuity Act.
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