Gratuity Calculator – Calculate Your Gratuity Amount India

Gratuity is a lump-sum payment made by an employer to an employee as a token of appreciation for the services rendered. Under the Payment of Gratuity Act, 1972, an employee becomes eligible for gratuity after completing at least 5 continuous years of service with the same employer. The gratuity is payable on: retirement or superannuation, resignation or termination (after 5 years), disablement due to accident or disease, or death of the employee (in which case the nominee receives it).

For employees covered under the Payment of Gratuity Act (organizations with 10 or more employees): Gratuity = (Last drawn monthly salary ÷ 26) × 15 × Number of years of service. The figure 26 represents the working days in a month, and 15 represents 15 days' salary for each completed year. For employees NOT covered under the Act: Gratuity = (Last drawn monthly salary ÷ 30) × 15 × Number of years of service. In both cases, only Basic Salary + Dearness Allowance is considered, not HRA or other allowances.

For employees covered under the Payment of Gratuity Act, the maximum tax-free gratuity is ₹20,00,000 (₹20 lakh). Any gratuity received above this limit is taxable. For government employees, the entire gratuity received is tax-free without any ceiling. For employees not covered under the Act, there is no statutory tax-free limit — the taxability depends on provisions under Section 10(10) of the Income Tax Act based on a formula considering half month's average salary for each completed year.

Yes, in a landmark Supreme Court ruling (Mettur Beardsell Ltd case), it was established that 4 years and 240 days (for organizations with a 6-day work week) or 4 years and 190 days (for 5-day work week organizations) qualifies as 5 completed years for gratuity purposes. This is because the courts have held that a part of the year exceeding 6 months should be rounded up to a full year. However, this interpretation may vary by organization and state, so it's advisable to verify with your HR department.

Under the Payment of Gratuity Act, an employer can forfeit gratuity (fully or partially) only in specific circumstances: 1) If the employee has been terminated for willful omission, negligence, or misconduct causing damage to the employer's property — up to the extent of damage; 2) If the employee has been terminated for riotous or disorderly conduct or violence; 3) If the employee has been convicted of an offense involving moral turpitude. Simple resignation or performance-based termination cannot lead to gratuity forfeiture.

For employees covered under the Gratuity Act, the number of years used in the formula considers any service exceeding 6 months in the last year as a full year. For example, if you have 5 years and 8 months of service, it counts as 6 years. If you have 5 years and 4 months, it counts as 5 years. However, you must have a minimum of 5 completed years (4 years and 240 days is treated as 5 years in many cases) to be eligible for any gratuity.

Under the Payment of Gratuity Act, the employer must pay gratuity within 30 days of it becoming payable. The employee or nominee must apply for gratuity in writing within 30 days of the event (retirement, resignation, death). If the employer fails to pay within 30 days, they are liable to pay simple interest at the prescribed rate. In case of disputes, the employee can approach the Controlling Authority (usually the Deputy Labour Commissioner) under the Act.