Gratuity Calculator
Calculate gratuity amount on retirement
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About Gratuity Calculator
Gratuity is a lump sum payment made by employer to employee as a reward for services rendered. It's payable after minimum 5 years of continuous service upon retirement, resignation, or death/disability. Gratuity is governed by Payment of Gratuity Act, 1972.
How is Gratuity Calculated?
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Gratuity applies to organizations with 10 or more employees
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Employee must complete minimum 5 years of continuous service
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Formula: (Last salary × Years of service × 12) ÷ 2.4 (private) or 2 (govt)
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Last salary means Basic + DA only, not gross salary
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Maximum gratuity is limited to ₹20 lakhs as per law
Example:
If last salary is ₹50,000 (basic+DA) and service is 10 years in private sector: Gratuity = (50,000 × 10 × 12) ÷ 2.4 = ₹2.5 lakhs. First ₹20 lakhs is tax-exempt.
Key Benefits
Retirement Benefit: Lump sum payment on retirement
Tax Exemption: Up to ₹20 lakhs is completely tax-free
Mandatory: Employers must pay, it's a legal right
Family Benefit: Payable to family in case of death
No Contribution: Employee doesn't contribute, fully paid by employer
Resignation: Payable even on resignation after 5 years
Frequently Asked Questions
Is gratuity applicable if I resign?
Yes, gratuity is payable on resignation if you've completed 5 years of continuous service. The calculation remains same as retirement. However, some organizations have internal rules for resignations, check your offer letter.
What if I work for less than 5 years?
Generally, gratuity is not payable for service less than 5 years. However, if termination is due to death or disability, gratuity is payable even if service is less than 5 years. Some organizations voluntarily pay gratuity even for shorter service.
Is gratuity different from PF?
Yes, completely different. PF is a savings scheme where both employee and employer contribute monthly. Gratuity is a one-time payment made by employer only. PF you get regardless of years, gratuity needs 5 years. Both are separate and you get both.
Can gratuity exceed ₹20 lakhs?
Yes, employer can pay more than ₹20 lakhs as per company policy. However, only ₹20 lakhs is tax-exempt. Amount above ₹20 lakhs is fully taxable as per your tax slab.