Gratuity Calculator India | Employee Gratuity Calculation Tool
What is Gratuity Calculator India | Employee Gratuity Calculation Tool?
A Gratuity Calculator is a financial tool designed to estimate the gratuity amount an employee is eligible to receive from their employer upon resignation, retirement, or termination of service after completing at least 5 years of continuous service.
Gratuity is a form of monetary benefit offered by employers as a token of appreciation for the services rendered by employees over a long period. It's a statutory obligation for organizations with 10 or more employees under the Payment of Gratuity Act, 1972 in India.
How Gratuity Is Calculated
The standard formula for calculating gratuity is:
Gratuity Amount = (Basic Salary + Dearness Allowance) × 15/26 × Number of Years of Service
Where:
- Basic Salary is the employee's last drawn basic salary
- 15/26 represents 15 days out of the 26 working days in a month
- Years of Service is the total duration of employment (any period exceeding 6 months is considered as one year)
Eligibility Criteria for Gratuity
- An employee must have completed at least 5 years of continuous service
- Applicable in case of resignation, retirement, termination due to disability, or death
- In case of death or disability, the 5-year condition is waived
Tax Implications
Gratuity received is exempt from income tax up to certain limits:
- For government employees: Fully exempt
- For employees covered under the Payment of Gratuity Act: Up to ₹20 lakhs
- For other employees: The least of the following three amounts:
- Actual gratuity received
- ₹20 lakhs
- Half month's salary for each completed year of service
Our Gratuity Calculator helps employees plan their finances better by providing an estimate of what they can expect to receive at the end of their service tenure. It enables better financial planning and transparency in understanding post-retirement benefits.
Examples
Let's look at some practical examples to understand how gratuity is calculated in different scenarios:
Example 1: Private Sector Employee (10 years of service)
Input Values:
- Basic Salary: ₹30,000 per month
- Dearness Allowance: ₹5,000 per month
- Years of Service: 10 years
- Organization Type: Private Sector (Covered under Gratuity Act)
Calculation:
Total Salary = ₹30,000 + ₹5,000 = ₹35,000
Gratuity Amount = (₹35,000 × 15/26) × 10 = ₹35,000 × 0.5769 × 10 = ₹2,01,915
Result:
- Gratuity Amount: ₹2,01,915
- Tax-Exempt Amount: ₹2,01,915 (fully exempt as it is under ₹20 lakhs)
- Taxable Amount: ₹0
Example 2: Government Employee (25 years of service)
Input Values:
- Basic Salary: ₹50,000 per month
- Dearness Allowance: ₹15,000 per month
- Years of Service: 25 years
- Organization Type: Government Sector
Calculation:
Total Salary = ₹50,000 + ₹15,000 = ₹65,000
Gratuity Amount = (₹65,000 × 15/26) × 25 = ₹65,000 × 0.5769 × 25 = ₹9,37,462
Result:
- Gratuity Amount: ₹9,37,462
- Tax-Exempt Amount: ₹9,37,462 (government employees get full exemption)
- Taxable Amount: ₹0
Example 3: High-Salary Executive (15 years of service)
Input Values:
- Basic Salary: ₹1,80,000 per month
- Dearness Allowance: ₹0 per month
- Years of Service: 15 years
- Organization Type: Private Sector (Covered under Gratuity Act)
Calculation:
Total Salary = ₹1,80,000
Gratuity Amount = (₹1,80,000 × 15/26) × 15 = ₹1,80,000 × 0.5769 × 15 = ₹1,55,76,300
Result:
- Gratuity Amount: ₹15,57,630
- Tax-Exempt Amount: ₹15,57,630 (under the ₹20 lakhs limit)
- Taxable Amount: ₹0
Example 4: Senior Executive (30 years of service)
Input Values:
- Basic Salary: ₹2,50,000 per month
- Dearness Allowance: ₹0 per month
- Years of Service: 30 years
- Organization Type: Private Sector (Covered under Gratuity Act)
Calculation:
Total Salary = ₹2,50,000
Gratuity Amount = (₹2,50,000 × 15/26) × 30 = ₹2,50,000 × 0.5769 × 30 = ₹43,26,750
Result:
- Gratuity Amount: ₹43,26,750
- Tax-Exempt Amount: ₹20,00,000 (limited to ₹20 lakhs)
- Taxable Amount: ₹23,26,750 (amount exceeding ₹20 lakhs)
Example 5: Employee with Less Than 5 Years of Service
Input Values:
- Basic Salary: ₹35,000 per month
- Dearness Allowance: ₹5,000 per month
- Years of Service: 4 years
- Organization Type: Private Sector (Covered under Gratuity Act)
Calculation:
Since the employee has not completed 5 years of service, they are not eligible for gratuity under the Payment of Gratuity Act.
Result:
- Gratuity Amount: ₹0 (Not eligible)
- Tax-Exempt Amount: ₹0
- Taxable Amount: ₹0
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How to Use Gratuity Calculator India | Employee Gratuity Calculation Tool
Our Gratuity Calculator is designed to be simple and user-friendly. Follow these steps to calculate your gratuity amount:
Enter Basic Salary
Input your current monthly basic salary (not your total CTC or gross salary). This is the fixed component of your salary used for gratuity calculation.
Add Dearness Allowance (if applicable)
If you receive a dearness allowance as part of your salary structure, enter the monthly amount. If not applicable, leave it as zero.
Specify Years of Service
Enter the total number of completed years you have worked (or expect to work) in your current organization.
Add Additional Months of Service
Enter any additional months beyond completed years. Note that 6 months or more is considered as a full year for gratuity calculation purposes.
Select Organization Type
Choose your organization type from the dropdown menu:
- Private Sector: For companies covered under the Payment of Gratuity Act
- Government Sector: For government employees
- Other: For organizations not covered under the Payment of Gratuity Act
Calculate Results
Click the "Calculate Gratuity" button to get your results. The calculator will display:
- Your total service period
- Service period considered for calculation
- Monthly salary considered
- Gratuity amount
- Tax-exempt amount
- Taxable amount (if any)
Important Notes:
- Gratuity is typically payable only after completing at least 5 years of continuous service (except for government employees or in cases of death/disability).
- The tax exemption calculation follows the latest Income Tax rules in India.
- For the most accurate calculation, use your last drawn basic salary before retirement/resignation.
Advantages of Gratuity Calculator India | Employee Gratuity Calculation Tool
Using our Gratuity Calculator offers several benefits for both employees and HR professionals:
-
Accurate Estimation
Get precise calculations based on the latest gratuity rules and formulas, helping you plan for your financial future with confidence.
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Tax Planning
Understand the tax implications of your gratuity amount, including exempt and taxable portions, allowing for better tax planning before retirement.
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Financial Planning
Knowing your expected gratuity amount in advance helps you make informed decisions about retirement savings, investments, and post-retirement expenses.
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HR Compliance
For HR professionals, our calculator ensures accurate gratuity provisioning in accordance with the Payment of Gratuity Act, helping maintain legal compliance.
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Scenario Planning
Experiment with different variables such as salary increments, years of service, and organization types to plan various career scenarios and their financial outcomes.
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Transparency
Bring clarity to the gratuity calculation process, helping employees understand how their benefits are calculated and what factors influence the final amount.
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Budgeting for Employers
Organizations can accurately estimate future gratuity liabilities, helping with financial planning, budgeting, and resource allocation.
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Simple and User-Friendly
Our intuitive interface requires no specialized knowledge of gratuity calculations, making it accessible to everyone regardless of their financial expertise.
Frequently Asked Questions
What is Gratuity?
Gratuity is a financial benefit given by an employer to an employee for rendering services continuously for 5 years or more. It's a token of appreciation for the services rendered by the employee and is payable at the time of retirement, resignation, or termination of employment (except in cases of termination due to misconduct).
How is Gratuity calculated?
Gratuity is calculated using the formula: (15 × Last drawn salary × Number of years of service) ÷ 26. The "salary" typically includes basic salary and dearness allowance. For employees not covered under the Payment of Gratuity Act, the calculation may be based on the company's gratuity policy or employment contract.
When am I eligible for Gratuity?
You are eligible for gratuity after completing 5 years of continuous service with an employer. However, in case of death or disability, the 5-year condition is waived. Gratuity is payable at the time of retirement, resignation, termination (except due to misconduct), disability, or to the nominee/legal heir in case of death.
Is Gratuity taxable?
Gratuity received by government employees is fully exempt from tax. For non-government employees covered under the Payment of Gratuity Act, the minimum of the following is exempt: actual gratuity received, ₹20 lakh, or 15 days' salary for each year of service. For non-government employees not covered under the Act, different calculation methods apply.
Can my employer refuse to pay Gratuity?
An employer cannot refuse to pay gratuity except in cases where the employee's services have been terminated due to misconduct involving moral turpitude. If an employer refuses to pay gratuity, the employee can approach the Controlling Authority appointed under the Payment of Gratuity Act for resolution.