FinCalc

Gratuity Calculator

Estimate your gratuity amount and tax-free limit

₹
Yrs

Employee Type

Gratuity Amount

₹4,61,538

Tax-Free Portion

₹4,61,538

Max ₹25 lakh exempt

Taxable Amount

₹0

No tax

Calculation

Formula: (Last drawn salary × Years of service × 15) / 26

(₹80,000 × 10 × 15) / 26

Note: For private sector employees covered under the Payment of Gratuity Act, the tax-free limit is ₹25,00,000. For government employees, the entire gratuity is tax-free. The formula uses 15 days of salary for each completed year of service, with months divided by 26 (working days).

What is a Gratuity Calculator?

Gratuity is a lump-sum benefit that your employer pays when you leave the organization after completing at least 5 years of continuous service. It's a statutory right under the Payment of Gratuity Act, 1972, and is calculated based on your last drawn salary and years of service. This calculator estimates your gratuity amount and shows how much of it is tax-exempt.

Many employees underestimate their gratuity entitlement — it can be a significant amount, especially after long tenures. The tax treatment is also favorable: up to ₹25 lakh of gratuity is tax-exempt for private-sector employees (as per Budget 2024 limits), and the entire amount is exempt for government employees.

When to Use This Calculator

  • Estimating your gratuity payout before resigning or retiring
  • Comparing gratuity entitlements from different employers or tenures
  • Understanding the tax-exempt limit on gratuity
  • Planning your finances around expected gratuity during job transitions
  • Checking if you qualify for gratuity (5-year minimum service rule)

Key Terms

Gratuity

A lump-sum payment from employer to employee as a reward for long service. Mandatory for establishments with 10+ employees. Calculated as: (15/26) × Last Drawn Salary × Years of Service.

Last Drawn Salary

Basic salary plus Dearness Allowance (DA) at the time of leaving. Other allowances (HRA, special allowances) are not included in the gratuity calculation.

Payment of Gratuity Act

The 1972 law that mandates gratuity for employees with 5+ years of service in establishments with 10+ employees. The maximum payable was raised to ₹25 lakh (from ₹20 lakh).

Qualifying Service

Minimum 5 years of continuous service with the same employer. Exception: in case of death or disability, gratuity is payable even before 5 years.

Frequently Asked Questions

What is the formula for gratuity calculation?+
For employees covered under the Gratuity Act: Gratuity = (15 × Last Drawn Salary × Years of Service) / 26. 'Last Drawn Salary' means Basic + DA. '15' represents 15 days' wages. '26' is the number of working days in a month. For every completed year of service (6 months+ rounds up to 1 year).
How much gratuity is tax-free?+
For government employees: entire gratuity is tax-exempt. For private-sector employees covered under the Gratuity Act: exempt up to ₹25 lakh (or the calculated amount, whichever is less). Any excess is taxed as income from salary.
What if I leave before completing 5 years?+
You don't receive gratuity. The 5-year rule is strict — 4 years and 11 months doesn't qualify. However, some employers offer gratuity voluntarily for shorter tenures. In case of death or disability of the employee, gratuity is payable regardless of tenure.
Can my employer refuse to pay gratuity?+
No, if you meet the eligibility criteria (5+ years, establishment with 10+ employees). Gratuity can only be forfeited fully or partially if the employee's termination is due to misconduct involving damage to employer's property or criminal offence. For normal resignation or retirement, it must be paid within 30 days.